Conduit IRA Trust

Submitted by Honey Solomon on Thu, 2017-10-12 14:34

I have a conduit IRA trust within my Living Trust. The IRA trust states that the income shall be accumulated and added to the principal. It also states that “not withstanding the preceding sentence, the trustee shall distribute all Required Minimum Distributions.” Is it OK that the IRA trust states that the income shall be accumulated? Or does it make the trust’s status as a conduit trust fuzzy?
Thanks for your help.



Submitted by Bruce Steiner on Mon, 2017-10-16 00:25

  • I prefer to draft in a way that avoids any doubt as to what is intended.  However, conduit trusts rarely if ever make any sense.  If the beneficiary lives to life expectancy, all of the IRA benefits will be thrown into the beneficiary’s estate and exposed to the beneficiary’s creditors and spouses, defeating the purpose of the trust.
  • See my article on this subject in the March 2004 issue of BNA Tax Management’s Estates, Gifts & Trusts Journal:  https://www.elderlawanswers.com/Documents/Trusts%20as%20Beneficiaries%20of%20Retirement%20Benefits.pdf ,

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