RMD Calculation with Trust Beneficiary

Submitted by Michele Meyers on Mon, 2014-12-29 16:57

Hello,
The client has setup a trust to benefit his spouse and put the trust as the sole beneficiary of the IRA. The spouse is more than 10 years younger than the IRA owner. Must he calculate his RMD using the uniform life expectancy table or can he use the other table based on his wife being more than 10 years younger? Thank you!



Submitted by Alan - IRA critic on Mon, 2014-12-29 17:31

Per IRS Reg 1.401(a)(9)-4, Q 6 copied below, joint Table II can be used as long as the trust is qualified for look through treatment per the usual requirements:

Q-6. If a trust is named as a beneficiary of an employee, what documentation must be provided to the plan administrator?A-6. (a) Required minimum distributions before death. If an employee designates a trust as the beneficiary of his or her entire benefit and the employee’s spouse is the sole beneficiary of the trust, in order to satisfy the documentation requirements of this A-6 so that the spouse can be treated as the sole designated beneficiary of the employee’s benefits (if the other requirements of paragraph (b) of A-5 of this section are satisfied), the employee must either—(1) Provide to the plan administrator a copy of the trust instrument and agree that if the trust instrument is amended at any time in the future, the employee will, within a reasonable time, provide to the plan administrator a copy of each such amendment; or(2) Provide to the plan administrator a list of all of the beneficiaries of the trust (including contingent and remaindermen beneficiaries with a description of the conditions on their entitlement sufficient to establish that the spouse is the sole beneficiary) for purposes of section 401(a)(9); certify that, to the best of the employee’s knowledge, this list is correct and complete and that the requirements of paragraph (b)(1), (2), and (3) of A-5 of this section are satisfied; agree that, if the trust instrument is amended at any time in the future, the employee will, within a reasonable time, provide to the plan administrator corrected certifications to the extent that the amendment changes any information previously certified; and agree to provide a copy of the trust instrument to the plan administrator upon demand.

Submitted by Bruce Steiner on Mon, 2014-12-29 21:14

  • The trust will have to meet the “sole beneficiary” requirement, which essentially requires that any distributions from the IRA to the trust during the IRA owner’s lifetime be paid out to the spouse.

 

  • Note that in order to do this, you give up substantial income tax benefits, including rollover, and the opportunity for the spouse to name new beneficiaries and potentially convert to a Roth.  While sometimes there’s no other way to accomplish the IRA owner’s objectives, often there is another way to accomplish the IRA owner’s objectives.

Submitted by Alan - IRA critic on Mon, 2014-12-29 21:31

The trust will have to meet the “sole beneficiary” requirement, which essentially requires that any distributions from the IRA to the trust during the IRA owner’s lifetime be paid out to the spouse.

Bruce, you mean post death distributions during the surviving spouse’s lifetime?  OP was primarily concerned about the IRA owner’s use of Table II for his own RMDs.

Submitted by Bruce Steiner on Tue, 2014-12-30 01:21

  • See § 1.401(a)(9)-5 A-4(b), which says you can use the spouse’s actual age if he/she is the sole beneficiary.
  • Then see § 1.401(a)(9)-5 A-7, which disregards a mere successor beneficiary but otherwise includes contingent beneficiaries.

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