Living Trust as Beneficiary
An 85 year old IRA owner passed away last year and the beneficiary of his IRA was his Living Trust (the tax id was his social security number). His nieces and nephews are the beneficiaries of the Living Trust. How and who determines if the trust qualifies as a Designated Beneficiary? Assuming it does qualify as a Designated Beneficiary, what is the protocol for getting the nieces and nephews the money? Does the IRA custodian issue a distribution check payable to the Trust or the beneficiaries (assuming they want to take the lump sum)? How is the 1099 issued if the check is payable to the Trust? This is very confusing.
Thank you!!
Permalink Submitted by Alan - IRA critic on Sat, 2016-01-23 04:35
The trustee must submit trust information to the IRA custodian no later than 10/31 of the year following the year of IRA owner’s death, and the custodian will determine if the trust meets the requirements for look through treatment. If so, the oldest beneficiary of the trust including remainder beneficiaries will determine the RMD made to the trust. Distributions are made to the trust and according to the trust provisions are retained in the trust and taxed at the higher trust rates or passed through to the trust beneficiaries by a K 1 and reported on each beneficiary’s 1040. The 1099R will be issued to the trust EIN which must be applied for by the trust as it becomes irrevocable upon the death of the grantor. If the trust does NOT qualify for look through, then the RMD will be based on the remaining life expectancy of the decedent.