IRA to trust inherited IRA

Submitted by Douglas Bauerband on Mon, 2016-04-25 16:45

client passed away at 56 and had his IRA went to his daughter (was divorced) and into a trust IRA fbo his daughter.

trust is listed as beneficiary.

Name of account: Mr. Smith’s rev trust, Ms. JIm trustee, FBO, Mr. smith’s daughter, DTD 9-27-07,

a. I know we have to take out RMD based on the daughters age each year, which we do.

However, in talking to Frank/Temp where the IRA is held, they are stating since it is a trust ira with the trust as beny, the IRS has the 5yr rule on this and the account must be liquidated by the end of the 5th year. This is why Frank/Temp will not setup an RMD on the account and we have to set up the distribution once a year manually.

questions:
1. with an inherited ira, his daughter should be able to take an RMD for the rest of the life, correct?

or…

2. does she have to take all of the IRA money out before the end of 5yrs?

any light you can shed on this?

Thank you,
Douglas



Submitted by Alan - IRA critic on Mon, 2016-04-25 16:58

The name of the deceased client should be included in the inherited IRA title. The 5 year rule would only apply if the trust were not qualified for look through treatment. Perhaps the trustee missed the deadline to submit trust information to Franklin-Temp?  Most trusts are qualified for look through and that would enable the RMDs to be based on the oldest trust beneficiary.



Submitted by Douglas Bauerband on Mon, 2016-04-25 17:23

when we did this two years ago and the trust was qualified.  Who would be the oldest as the trust is listed as beneficiary (since it is to go to exwife if daugter passed away) or does the oldest beny relate to the FBO, which is his daughter?



Submitted by Alan - IRA critic on Mon, 2016-04-25 17:53

Since ex is only a successor beneficiary of the trust, the LE of the daughter should apply. However, the custodian seems to be taking the position that the trust is not qualified since that is the only way the 5 year rule would apply.https://irahelp.com/slottreport/successor-beneficiaries-beneficiarys-beneficiary



Submitted by Bruce Steiner on Sun, 2016-05-01 03:42

  • To whom would the balance of the trust go when the daughter dies?
  • Also, if the IRA was payable to a revocable trust rather than to a trust for the daughter, there’s a greater possiblity that it won’t qualify for the stretch.
  • See my article on this subject:  http://www.elderlawanswers.com/Documents/Trusts%20as%20Beneficiaries%20of%20Retirement%20Benefits.pdf. 


Submitted by Douglas Bauerband on Tue, 2016-05-03 16:11

a. balance of trust would go back into the trust if daughter passes away (she is 25).  the trust then names the ex wife to inherit the money.  At 30 the daughter gets all the money from the trust.b. the web address yuo gave me states it no longer exists:To whom would the balance ofSubmitted by [email protected] on Sat, 2016-04-30 23:42

  • To whom would the balance of the trust go when the daughter dies?
  • Also, if the IRA was payable to a revocable trust rather than to a trust for the daughter, there’s a greater possiblity that it won’t qualify for the stretch.
  • See my article on this subject:  http://www.elderlawanswers.com/Documents/Trusts%20as%20Beneficiaries%20of%20Retirement%20Benefits.pdf


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