I acknowledge, and mostly agree with, Bruce Steiner’s skepticism about the usefulness of conduit trusts. That said, I have a few clients who like their relative simplicity. One of the reasons, admittedly, not a strong one, is that they don’t want to think too hard about the trust remainder provisions.

Here’s my issue: Assuming that the conduit trust holds only the IRA, then, when the trustee is preparing the 1041, all of the income will flow out to the beneficiary on the beneficiary’s K-1. I assume that that “income” includes expenditures that the trustee made during the year for the benefit of the beneficiary, not just payments made directly to the beneficiary. So, for example, suppose the trustee pays rent directly to the landlord because the beneficiary can’t be trusted to pay his own rent if given the funds to do so. My understanding is that the trustee’s payment of the rent will count as being distributed “to the beneficiary”. Am I correct – or does the RMD have to be distributed directly into the hands of the beneficiary in order to satisfy the requirements of a conduit trust?

Please forgive my re-posting of this question; the answer may be obvious, but I would value the views of the participants of this discussion forum. Many thanks.