Effect on Stretch of look thru trust contingent benficiarie’s ages
My Ira is going to a look thru trust with my daughter as the sole beneficiary.
The trust names several remainder beneficiaries (other relatives) who would become entitled
to trust assets on my daughters death. Several of these relatives are older than my daughter.
ON my death and while my daughter is living will the stretch be calculated on my daughters age or the oldest remainder beneficiary age?
Also if I correctly list my daughters look thru trust as the primary beneficiary of my IRA
can I list the older relatives as contingent beneficiaries of the same IRA without effecting the trusts ability to stretch RMDs over her age.
Thanks
Permalink Submitted by mk foss on Wed, 2014-09-03 18:19
The determining factor is whether the current RMDs are distributable annualy to your daughter. If so, the ages of the older relatives will not be considered. It’s always more flexible if you can name your daughter directly as a beneficiary, but you must have a good reason for structuring things as you have.
Permalink Submitted by Alan Baker on Wed, 2014-09-03 18:38
As I am approaching MRD age I expect that i will have been taking MRD’s on my death. Will daughter via her trust be able to start taking MRD’s at my death and have them stretched out based on her age?TYPS The reason not to leave the IRA directly is to provide normal trust protections.
Permalink Submitted by Alan - IRA critic on Wed, 2014-09-03 19:15
If your trust is qualified for look through treatment, the oldest trust beneficiary’s life expectancy will determine the applicable distribution rate. Purely successor beneficiaries are not considered here. This is true whether you passed prior to or after your required beginning date. There are time limits for trust information to be provided to the IRA custodian after your death, and if these deadlines are missed, then the trust will not be qualified regardless of whether the trust originally met the other requirements. The courts are now eliminating creditor protection for inherited IRAs, and that will lead to more IRAs being left to trusts to offset the loss of creditor protection.
Permalink Submitted by Bruce Steiner on Wed, 2014-09-03 21:56
It’s more flexible to give the trustees the flexibiilty to distribute as little or as much as is appropriate from year to year. If you do that, you have to consider the remainder beneficiaries in determining the oldest beneficiary. If you force out the distributions from the IRA, you’ll throw them into the beneficiary’s estate for estate tax purposes, and you’ll expose them to her creditors and spouses. See my article on this subject in the March 2004 issue of BNA Tax Management’s Estates, Gifts & Trusts Journal: http://www.kkwc.com/docs/AR20041209132954.pdf.