IRA Distribution Rule for Trust after Required Beginning Date
Does the 10 year rule still apply if a trust is named the beneficiary of an IRA after the required beginning date and the trust does not qualify as a see-through trust? The IRS RMD chart seems to suggest if the trust is worded in a way that makes it a non-designated beneficiary the original owner’s life expectancy factor minus 1 would be used going forward. If an person dies at 80 the life expectancy factor is 18.7. Wouldn’t there be an incentive to word a trust in a way to utilize the original owner’s RMD to circumvent the 10 year rule yet still provide access to income/principal if the ultimate beneficiary is a to a non- eligible designated individual? Thanks!
https://www.irs.gov/retirement-plans/required-minimum-distributions-for-ira-beneficiaries
Permalink Submitted by Alan - IRA critic on Wed, 2021-02-10 15:04
Yes, this situation has been widely acknowledged, and it is unknown how or if the IRS will address it when they write the Secure Act Regs. In fact, it is not even necessary to change the trust wording because submission of the trust details to the IRA custodian is a requirement for a qualified trust. Therefore, it appears that if the trust trustee simply declines to submit trust info by the deadline (10/31 of the following year), the trust will not be qualified regardless of other compliant provisions included.