Personal Trust as IRA Beneficiary

My Clients have named their Personal Trust as Beneficiary to their IRAs, their only daughter is named beneficiary of this Trust. Now that Clients have died, their IRA Custodian will not allow a Transfer to an Inherited IRA in the name of the daughter. Is this correct?



If the terms of the trust allow the trustee to distribute the IRA out of the trust, the IRA custodian should cooperate and accept assignment of the IRA to the beneficiary of the trust. But it is important whether the trust is qualified for look through treatment or not since that determines the RMD distribution period. If the trust meets qualification requirements, the daughter would generally be subject to the 10 year rule, but if the trust failed qualification, then it would be treated as a non individual beneficiary which would change the distribution period to 5 years if owner passed prior to RBD, or the remaining life expectancy of owner if owner passed on or after the RBD. Whatever the RMD distribution period, that is not a factor in whether the IRA custodian would accept assignment, and if assignment is granted it will have no effect on the distribution period based on the qualification status of the trust. Some custodians still resist assignment even though it is clearly allowed by the IRS. In that case, the only option is to find another custodian who will accept assignment and transfer the IRA to that custodian. Since IRA custodians do not much like inherited IRAs, it may be difficult to find another one if the current custodian does not cooperate with assignment.
If the trust allows termination, why did clients leave the IRA to the trust in the first place rather than naming the daughter outright?

Thank you Alan, this is as I though too.

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