RLT & Conduit Trust
A father, age 63, dies in 2015 with an IRA valued at $ 1,000,000.00. It earns 5% making the end of year value $ 1,050,000.00. The beneficiary is a qualifying RLT with Conduit Trust provisions. The benefactor to the trust is his daughter who will be age 36 in 2016.
The IRA earned $ 50,000.00 in 2015. The RMD to be taken by 12/31/2016 for a 36 year old is $ 22,105.26 ( $1,050,000.00 / 47.5 ).
Here is my questions:
1) Does the Conduit language specify that just the $ 22,105.26 (RMD) be taken or does the entire $ 50,000.00 need to be taken?
2) If just the $ 22,105.26 need be taken, is the remaining $ 27,894.74 of interest earned continuing to grow tax deferred or is it being taxed at the trust rate?
Permalink Submitted by Ben Meyer on Mon, 2015-05-11 21:18
To satisfy the RMD requirements, the IRA must distribute the RMD, as a minimum. The terms of the trust and state law will determine whether only the RMD is distributed to the beneficiary, or if all earnings must be distributed. Some trusts are permitted to accumulate earnings, which in this situation could remain in the IRA. More commonly, trusts are required to distribute earnings annually to the beneficiary. There are also income tax implications as to where the earnings are taxed. either to the beneficiary, to the trust, or if the earnings can remain deferred in the IRA.