Fact-check: pre-SECURE see-through trust

Submitted by Robert Vashko on Mon, 2020-07-13 16:18

401(a) owner died in 2019. Left 401(a) to see-through accumulation trust fbo his 5-y.o. daughter. Account holds both pre- and post-tax amounts, and little girl isn’t supposed to get any of the money until she is 35.

Plan custodian is willing to cut a check to the trust for just the post-tax amount, and direct transfer the pre-tax amounts to a new bene IRA custodian. Trust will accumulate annual stretch RMDs off the pre-tax amount.

I can’t see anything wrong with that from an IRA rules perspective, but I get so few 401(a) questions, much less one involving pre- and post-tax monies. Am I missing anything?

Please and thank you.



Submitted by Alan - IRA critic on Mon, 2020-07-13 19:31

  • It is critical that the trust be qualified for look through, which includes the trustee providing trust beneficiary details to the plan custodian no later than 10/31/2020. With the trust being qualified, a split direct rollover of the post tax money to an inherited Roth IRA in the name of the trust, and the pre tax amounts to an inherited TIRA in the name of the trust is enabled. Without such trust qualification, the plan will become subject to the 5 year rule, assuming father passed prior to RBD.
  • Annual beneficiary RMDs will still be required beginning in 2021, but the inherited Roth should become qualified before such RMDs exceed the inherited Roth basis. 

Submitted by Robert Vashko on Mon, 2020-07-13 20:23

Suppose they didn’t want to go the inherited Roth route with the post-tax money, and they just want that tax-free money lump-sum in-hand.  I recognize the loss of tax-free growth potential, but otherwise, is there any reason the trust could not receive that lump-sum check as a distribution?

Submitted by Alan - IRA critic on Mon, 2020-07-13 21:21

I don’t see any problem with that. 

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