Inherited IRA from a Trust

Submitted by Aaron Strom on Mon, 2017-09-18 00:34

My father passed away at the age of 86 last October. His IRA had his QTIP trust as the beneficiary. My mother was the beneficiary of the trust.We rolled the IRA into a Bene IRA for the trust. My mother then passed away in January. The trust states upon her death the assets are to be distributed equally to my sisters and I. The bank that I set the Bene IRA for the trust, seems to think I cannot role that IRA into 3 separate IRAs for my 2 sisters and I. They say it has to be immediately liquidated and taxes on the entire amount have to be paid now. My CPA says they are wrong and that the RMDs should continue on the schedule that was set up for my mother within the 3 new Bene IRAs. The bank claims that because we were not listed as direct beneficiaries of the trust is why the IRA has to be immediately liquidated. I cannot find anything in the tax code to back up the banks claim. Who is right the bank or my CPA?



Submitted by Bruce Steiner on Mon, 2017-09-18 14:40

  • Why didn’t your mother’s executors disclaim, so that the IRA would go to you and your sisters as the contingent beneficiaries (assuming you and your sisters were the contingent beneficiaries), so that you could stretch it over your lifetimes?
  • The accountant is correct.  The lawyer handling her estate, or the lawyer handling your father’s estate, should deal with the bank on this.

Submitted by Ben Meyer on Tue, 2017-09-19 01:46

If a disclaimer had been executed by the mother’s executors, why wouldn’t the IRA have gone to the sisters as the remainder beneficiaries of the QTIP trust, assuming that the mother had not yet received any distributions and that no other trust terms had applied?

Submitted by Bruce Steiner on Wed, 2017-09-20 13:00

I assumed that the designation of the QTIP trust as primary beneficiary was contingent upon the IRA’s owner’s wife surviving him, in the same way that if he had designated her as the primary beneficiary it would have been contingent on her surviving him.  It wouldn’t make any sense to name a QTIP trust as beneficiary even if the spouse doesn’t survive the IRA owner.  .

Submitted by Ben Meyer on Wed, 2017-09-20 19:59

Thanks, that makes sense.  Now I see that If the spouse didn’t survive the owner there would be no point to have the trust name the QTIP trust as beneficiary, since there would be no need for the special QTIP provisions for the surviving spouse, and confusion might result.  A disclaimer would have the effect of having the disclaimant predeceasing the owner in a legal sense.

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