Trust as Beneficiary of IRA with a charity plus 3 individuals as Beneficiaries of the trust

Submitted by Michael Lott on Wed, 2014-12-03 21:53

Deceased is age 80 and has been taking rmd’s. Trust named as beneficiary of 2 ira accounts. . Trust has three nieces/nephews as beneficiary along with a charity. Trust would qualify as a “look through” trust if not for the charity. Questions as follows: 1. Can the trust split the ira into 4 separate inherited ira accounts, one for each beneficiary? 2. Since the charity wants cash can they just be paid out before Sept. 30th of the year following death and the remaining 3 individuals then would all qualify as “designated beneficiaries” and could stretch the ira? 3. If 2 of the 3 individuals want cash and one wants to stretch the inherited ira would they still need to use the oldest age for rmd, assuming they were allowed to do that instead of using the 5 year rule? 4. Are the first 3 questions all a moot point and they would have to use the 5 year rule since the charity is involved?

Thanks.



Submitted by Alan - IRA critic on Wed, 2014-12-03 23:08

  1. 4 inherited IRAs could be established as long as the terms of the trust do not disallow this. That would result in 8 total IRA accounts, 4 for each IRA unless the IRAs were combined as well.
  2. Yes, the charity must either disclaim or it’s share must be fully distributed by 9/30 or the trust will be disqualified.
  3. The 5 year rule never applies when IRA owner passes on or after the RBD. The two individual beneficiaries wanting to cash out could be handled just like the charity. If they are paid off by 9/30, the RMD for the sole remaining beneficiary will be based on the age of the remaining beneficiary. If not paid off in time, then the age of the oldest will apply.
  4. See above. 5 year rule would not apply in any event, but if the charity is not paid off by the deadline, then the IRA would have to be distributed over the remaining non recalculated life expectancy of the decedent (about 10 years).
  5. Trust may or may not contain provisions allowing termination. If so, the remaining IRAs could be assigned directly to the remaining trust beneficiaries, but that would not change the RMD for those beneficiaries.


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