IRA at Death
Client is 70 years old, dies can he leave his IRA to a trust And control/Limit distribution to the kids within 10 years?
To satisfy the new IRA Rules? I was told that the beneficiary has total control and the decedent cannot control distribution within the 10 years that they have to liquidate.
Example: $120,000 IRA and only allow $10,000 max a year he can take out via the trust.
Permalink Submitted by Alan - IRA critic on Mon, 2020-09-21 18:51
Once the child reaches the age of majority they have 10 years to fully distribute the inherited IRA. If they take out approximately equal amounts each year, they will avoid a tax rate spike in the last year when the account must be drained. You could leave the IRA to a trust for the kids that limits distributions by the year OR until the 10th year, but then there could be a tax spike depending on the amount of the IRA after 10 years of earnings and the number of beneficiaries.
Permalink Submitted by Anthony Perrone on Tue, 2020-09-22 16:13
Is there any special language in the trust to limit withdrawals in the 10 years? Have an attorney saying it cant be limited on the withdrawals for 10 years
Permalink Submitted by Alan - IRA critic on Tue, 2020-09-22 16:47
All the IRS cares about is that the account is drained by the end of the 10th year, so it is not clear why this attorney is stating that distributions before the 10 years is up cannot be limited. The IRA can be left to an accumulation trust where the trustee has discretion how much to distribute from the IRA each year and how much to disburse to the beneficiaries. All the IRS cares about is that the IRA is drained within 10 years. I would check with another estate attorney.