TIMING FOR RMD FROM TRUST with SPOUSE as BENEFICIARY
If a “qualified” Trust is the designated beneficiary of an IRA when MUST the first RMD be taken?
I assume that the spousal “rollover” option goes away if the Trust is named as beneficiary, which means the RMD requirement is the same as if the IRA was an inherited IRA for a non spouse — in other words, RMD must begin the year after death regardless of who inherits the IRA.
Is this correct ? If so, and if naming the Trust is not a requirement by the IRA owner to control the funds after death, then the use of the Trust eliminates an important option for a spouse who may not wish to take RMD now and wants the IRA to continue to grow tax deferred.
Can you confirm?
Permalink Submitted by mk foss on Thu, 2011-08-04 16:58
Bruce Steiner has written at least one article showing how a spouse can roll ovr a IRA left to a trust. He may post a link that you can learn from.
If the trust is a beneficiary and a rollover will not work, RMDs begin in the year after death. The spouse’s life expectancy (if she’s the oldest beneficiary) is used.
When an individual dies before his/her Required Beginning Date with a spouse as a beneficiary, the spouse can put off RMDs until the year the deceased IRA owner would have reached age 70.5. Alan or Bruce may have an opinion as to whether this is possible when a trust is named as the beneficiary.
If the couple lived in a community property state and this were a “family trust” a spouse who has the ability to make a nonprorata division of community property assets can allocate the IRA to the survivor’s share and do a rollover.
Is there a contingent beneficiary? If the spouse were the contingent beneficiary, it’s possible to have all trust beneficiaries disclaim an interest in the trust so the spouse can do a rollover.
Permalink Submitted by Alan Spross on Thu, 2011-08-04 17:24
Here is a link to Bruce’s article:
http://www.kkwc.com/docs/AR20050125164755.pdf
Mary Kay,
Have been attempting to find any cites about a sole spousal trust beneficiary of a qualified trust being able to defer RMDs until decedent would have reached 70.5. No luck in the IRS Regs, but the treatment as a designated beneficiary for other RMD calculations should lead to the conclusion that the RMDs can be deferred to that date. Here is another indication of support. While both spouses are still alive and sole trust beneficiary spouse is more than 10 years younger than the owner, the Regs support treating the spousal beneficiary as a sole IRA beneficiary in order to use Table II for RMDs of the owner.
Obviously, if the trust has no other beneficiaries than the spouse including no remainder beneficiaries and no limits on distributions, the IRA should be left outright to the spouse instead. But it is also more likely the spousal rollover could be done in this situation. That would result in the RMDs falling under the Uniform Table where they would be considerly lower than under the beneficiary Table I. But if the surviving spouse delays the rollover attempt until the deceased spouse WOULD HAVE reached 70.5, that could delay the start of RMDs in the first place and then the rollover could be pursued.
Perhaps Bruce has some thoughts regarding securing a max stretch in this situation…..