SECURE Act

Submitted by Beverly Bonya on Thu, 2020-02-20 19:35

Under the SECURE Act, can a trust be an an EDB if the primary and remainder beneficiaries are EDBs? if yes, what is the status of a trust as an EDB if the primary beneficiary is an EDB, but the remainder beneficiaries are not EDBs? Assuming that such a trust is not an EDB after the death of the EDB, does the 10 year rule apply or must the trust terminate immediately?



Submitted by Alan - IRA critic on Thu, 2020-02-20 23:29

  • If a EDB is either disabled or chronically ill, the rules are broader than for other EDBs. For a conduit trust, any EDB conduit beneficiary will get the LE stretch regardless of the status of the successor beneficiaries (there are no remainders). For an accumulation trust, the 10 year rule is likely to apply (subject to IRS guidance) unless all countable beneficiaries are EDBs. However, this restriction does not apply to disabled or chronically ill EDBs.
  • Only the trust provisions control when the trust terminates. The Secure Act controls when the retirement plan must make distributions to the trust. Therefore, under the 10 year rule the retirement plan balance might be distributed to the trust, eliminating tax deferral, but the trust can remain.

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