Trust named as beneficiary to deceased IRA and objective to change to Inherited IRAs for two sons as only trust beneficairies
I have clients that have received their father’s traditional IRA that named his Trust as the beneficiary at a bank. The two sons John and Don would like to transfer this Trust owned IRA into two Inherited IRAs in the name of their deceased father FBO John and Don separately. This bank has done this before with other clients but now they say they cannot do that. They state that the only option is to liquidate the IRA and pay out separately as taxable distributions. Is this correct?
Permalink Submitted by Bruce Steiner on Thu, 2014-10-02 02:34
It depends on the terms of the trust. Why would someone go through the effort to create a trust and name it as the beneficiary of his IRA only to have the trust immediately terminate? He could have simply named his sons (or trusts for their benefit) as the beneficiaries of his IRA.
Permalink Submitted by mk foss on Thu, 2014-10-02 23:51
Some custodians are more coopeative than others when a trust is named as a beneficiary. If the current beneficiary won’t allow you to follow the trust agreement, you should transfer the beneficiary IRA to another custodian. You can’t go directly from the father’s IRA to the sons but the beneficiary IRA naming the trust should be able to transfer amounts to inherited IRAs if the trust agreement allows for that.