Beneficiares of IRA – one is a Trust that was not set up
There are three beneficiaries of the IRA. Paul, John and the Testamentary Trust under the will of deceased for the benefit of Lisa. The IRA owner died last year. The trust for beneficiary # three has never been set up. Is it 1) recognized as a beneficiary as of September 30th and 2) if not, does that portion of the IRA revert back to the estate because the trust was never set up?
Thanks
Permalink Submitted by Alan Spross on Mon, 2012-10-29 23:18
The problem is not 9/30, but the 10/31/2012 deadline to provide a copy of the trust instrument to the IRA custodian if the trust is to qualify for look through treatment. The two individual beneficiaries can still create separate IRA accounts before year end 2012 in order to use their own life expectancy for RMDs.
If the documentation is not provided for the trust, the trust will be treated like the estate for RMDs. That would result in the 5 year rule applying to the trust if the IRA owner passed prior to the RBD, and the remaining life expectancy of the decedent if they passed on or after the RBD. The trust can still be created late and receive RMDs under those restrictions.
9/30 was the deadline for elimination of consideration for any beneficiary by disclaimer, but the individual designated beneficiaries have another 3 months to create separate accounts. Separate account rules do not apply to trusts.
Permalink Submitted by mk foss on Mon, 2012-10-29 23:25
I agree with Alan. I just want to add thata trust can qualify as a “see-through” trust even if un-funded. So getting the trust in place before the end of this year will work.