YOUR POINT ONE:  I now know that the beneficiary form with both of the IRA’s SHOULD HAVE NAMED THE 4 BENEFICIARIES, EA 1/4, and that apparently would have worked just fine to dispurse into the inherited IRA’s of the 4.   My sister is the deceased.  The attorney knew it was her wish to distribute to the 4 but gave no information, direction or caution about “naming”.   We were instructed to put the assets in stating “NAME REVOCABLE TRUST” as the beneficiary.   My sister was within a month of her death when this was finalized.   We presumed we were doing what was correct.  I believe the attorney handled this as a cookie cutter quick trust and made no reference to any details about ultimate distribution of 500,000 in two IRA’s and any tax benefits or tax ramifications.   YOUR POINT THREE:  I had one complimentary visit with the attorney after my sister’s death.  Prior to meeting with her I read two books on my role as Trustee and Trusts.  I had a number of questions and frankly she didn’t impress me one bit.  She wanted to charge around $4000 to handle the final affairs…and I didn’t see her as anything other than a high pressure salesman and had no confidence in her ability.   This was in February…long before finding out about the issue at hand now.   My family has a long relationship with the current broker where some of my sister’s funds were held ($100,000) in stocks.  After talking with them they stepped in to help facilitate the dispersement of the two IRA’s.   They had the 4 inherited IRA’s set up and ready to receive—then Pershing dropped the news on us.   I’ve been advised that the Broker’s attorneys and Pershing attorneys have been in long discussion without a resolution.   Pershing via the Broker sent me (Trustee) the letter below giving me some options to overcome the hurdle.A conference call was held with Broker, Attorney that did the Trust, and myself.  She said it would cost $1,000 for her to write the letter for Pershing….a $500 letter for just her opinion….a $1,000 for her to add PLR rulings.   That was a week ago Tues and she called on Friday and said no such letter could be written by her and no attorney would write such a letter and they were refunding the entire $1000 to me.   I was told by her that Pershing was just being a real stickler on this and that another custodian would probably not care.   THE LAST THING I WANT IS TO CREATE A TAX ISSUE WITH IRS FOR MYSELF OR THE 3 OTHER BENEFICIARIES.   So when you say find a friendlier custodian….that means I have to ditch my Broker? who I have great confidence in?    And how does one FIND a friendlier custodian?   I think it behooves me to try and solve this for the 3 other beneficiaries who will benefit considerably using THEIR AGES FOR DISTRIBUTION IN THEIR OWN INHERITED IRA…..THAN A TRUST IRA BEING DISTRIBUTED EACH YEAR BASED ON MY AGE LOSING THAT TAX BENEFIT.Help….help….help….send me in the right direction.   I did look up from your site experienced attorney’s in this area and believe that’s what I should do next….but would certainly like some further insight into whether or not I’m on a wild goose chase.Thanks for any comments or suggestions.   Sorry this is so long and do appreciate input.   See below Pershing’s requests.——————————————-  The “See through Trust” concept continues to be a source of concern for our client’s and Pershing is making every effort to attempt to obtain a comfort level to offer this type of processing. Items to consider for Straight Through Processing, which does not require an exception to review: ·         The Trustee/Attorney would contact the IRS directly to obtain an exception from the IRS in the Form of a Private Letter Ruling (PLR) specific to this IRA. We understand this process will not work for all clients due to the expense incurred and the fact there is no guarantee the IRS will approve the exception.  ·         If the IRA Owner has passed within 9 Months of the Date of death perhaps the Trustee would consider disclaiming the Trusts’ right as the beneficiary. Things to consider:o   Were any distributions taken from the Inherited Trust, above any RMD amount? If so disclaiming is no longer an option. o   As stated above you must be within 9 months of the date of death of the IRA Owner, in accordance with Internal Revenue code (IRC) 2518. If after 9 months disclaiming is no longer an option. o   Are there any other Primary or contingent beneficiaries that would be next in line to receive the benefit of the Trust. Will this get you to the desired outcome? If not will the other Primary/Contingent Beneficiaries also be willing to disclaim their rights as the designated beneficiary? ( As stated above all actions to disclaim must be done within 9 months of the date of death of the IRA Owner in accordance with IRC 2518)o   Who are the beneficiaries of the Trust? Will Pershing’s ordering rules or the other Primary/Contingent beneficiaries get you to the desired result?  Pershing’s ordering rules are: Spouse, Children Equally Per Stirpes, Estateo   If the Ordering Rules will determine the beneficiary, Pershing requires a Letter of Indemnification from the Broker Dealer confirming if the IRA Owner was married at their time of death, and if applicable who all the Children of the IRA Owner are. o   Please note as with all disclaimers the individual or Entity disclaiming must properly disclaim with their State of residence, this is not something provided to Pershing, the beneficiaries must be aware of this step in the process. o   A disclaim letter to Pershing is very simple, if allowable, then a letter of instruction is provided, such as, I Jane Doe acting at the Trustee of the John Doe Trust disclaim 100% of the Trust’s right as the designated beneficiary.  This letter must be signed, dated and received by the IRA Custodian within 9 months of the date of death of the IRA Owner.  If an RMD was taken, then please include in the letter that only the RMD amount was taken and nothing above. As stated above if any amount over the RMD was taken, then disclaiming is no longer an option.  Another possible option is to work with Pershing’s Legal Department to see if an exception can be granted, this review will take some time and I have seen it require several attempts due to the Attorney representing the Trust failing to provide specific details in their letter of opinion.  Often we find Attorneys do not want to go through the Private Letter Ruling (PLRs) process with the IRS, instead they want to rely on PLRs where other Trust IRA Beneficiaries were granted the exception to give the assets directly to the underlying beneficiaries of the Trust into their own Inherited Individual Accounts, under the individual’s name and social security number  when the designated beneficiary of the IRA Owner was the Trust not the individuals.  To consider this review Pershing requires the following: ·         Detailed Letter of Opinion from Counsel, in this Opinion Pershing will look for the following:o   The Attorney’s analysis in how this is an appropriate action to take with this specific Trust based on the specific language of the trust, referencing the specific language of the Trust they are relying on. o   The letter must include language regarding the obligation of the IRA Custodian to Tax report, meaning issuing a 1099R or not in these specific circumstances. o   Confirmation the assets are free/clear of any obligations within the trust, meaning the Trustee has sole desecration over the manner in which the assets are distributed. o   Explanation of the Facts of the Trust and why the cited Private Letter Rulings (PLRs) specifically pertain to this Trust. The PLRs must have similar fact patterns to the Trust. For example if you are dealing with a non-spouse beneficiary of the Trust Pershing would not accept PLRs specific to a Spouse Beneficiary of the Trust. o   Provide copies of the PLRs you are relying on. o   If the letter of opinion is approved, Pershing then requires a specific Attestation from the Trustee (attached). 

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• In response to DMx, yes, naming the beneficiaries individually would have allowed each one to use his/her own life expectanty.  However, unless the amounts involved are too small to warrant administering trusts, our clients generally provide for their beneficiaries (other than the spouse, who can roll over IRA benefits payable outright) in trust rather than outright.  In the case of children, each child is usually a beneficiary of the other children’s trusts (if a child dies without leaving any issue and without exercising his/her power of appointment), so that, if that’s the case, the oldest child will be the measuring life for all of the children’s trusts.

• Given the large age difference in this case, where the benefits go to a sister who’s 71 and nieces and nephews who are 47, 47 and 51, we probably wouldn’t include the sister as a beneficiary of the trusts for the nieces and nephews.  It’s unlikely that a niece or nephew would die without leaving any issue (children, grandchildren, etc.), and without exercising his/her power of appointment, and at a time when the sister is still living.  So adding the sister as a contingent beneficiary substantially reduces the stretch for the nieces and nephews while providing very little benefit.

• From a planning standpoint given the ages, the IRA owner might have left the IRA to the nieces and nephews, either outright or in separate trusts for their benefit, and then left (in his/her Will) a bequest to the sister in an amount equal to the value of each niece/nephew’s share of the IRA, so as to even up the sister.  In that way, the nieces and nephews would have obtained a longer stretch.  

• While we generally prefer to leave property in trust rather than outright (to keep the inheritances out of the beneficiaries’ estates for estate tax purposes, and to protect the inheritances against the beneficiaries’ creditors and spouses), in this case, since the IRAs are only $500,000, most IRA owners would leave the IRAs outright rather than creating four separate trusts for $125,000 each.

• It probably wouldn’t work for the trustee to disclaim.  First, in some states, trustees can’t disclaim.  Second, even if the trustee can disclaim, where would the IRA then go?  If to the IRA owner’s estate, that’s a worse result.  Since the IRA owner died before the required beginning date, the IRA would have to be paid out within 5 years.

• However, it might be possible for the sister to disclaim his/her interest in the IRA payable to the revocable trust.  Of course, when you disclaim, you can’t specify where the disclaimed property goes.  She might be more amenable to disclaiming if she doesn’t need the money and if the disclaimed property goes to her children.  However, if she might need the money, or if the disclaimed property goes to persons other than her children, she would be less likely to disclaim.

• The comments about how to disclaim are not correct.  Per Revenue Ruling 2005-36, taking more than the required distribution doesn’t necessarily preclude a disclaimer.  However, some states have specific requirements for disclaimers.  For example, in New York, disclaimers have to be filed with the court.

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