Stretch IRA
Can a stretch be done if the IRA names a trust as beneficiary and that trust names another trust as the beneficial interest? The second trust names individuals as the beneficiaries.
Can a stretch be done if the IRA names a trust as beneficiary and that trust names another trust as the beneficial interest? The second trust names individuals as the beneficiaries.
Permalink Submitted by Alan - IRA critic on Fri, 2014-04-11 00:39
Yes, the the oldest beneficiary of the second trust can be treated as the designated beneficiary of the IRA as long as both trusts meet the requirements of a qualified trust as stated in Pub 590, p 40. Per IRS Reg 1.401(a)(9)-4, Q&A 5.
Permalink Submitted by F N on Fri, 2014-04-11 16:34
In this case, the first trust is a MA nominee trust which states that it can be amended. But for tax pruposes it was not recognzed by the IRS and treated as a pass through entity during the time when the settlor was alive nor did the trust have an EIN. The second trust is irrevocable. Pub 590 states that the trust must be irrevocable. Since the nominee trust is not a recognized entity by the IRS could it be inferred that the stretch is ok. If not then does the entire IRA have to be distributed or can it be done over 5 years?
Permalink Submitted by F N on Fri, 2014-04-11 16:31
na