IRA Beneficiary

Submitted by Ronald Manso on Wed, 2021-02-24 23:02

I have a client who died one month ago and the named beneficiary is a family limited partnership with Fidelity as the custodian.
Questions:
1. Can the account become an IRA BDA account with the family limited partnership having beneficial ownership?
2. Since there are 7 owners of the family limited partnership can the account eventually be split up as a IRA BDA for the seven owners into 7 separate accounts?
Thanks.



Submitted by Alan - IRA critic on Thu, 2021-02-25 00:14

Both should be OK, with 2) subject to the guidelines of the IRA custodian. However, as a non individual beneficiary the FLP will be subject either to the 5 year rule (Death prior to RBD) or the remaining LE of the decedent (death on or after RBD), and assignment out of the FLP will not change the RMD distribution period. Note that if current custodian was unwilling to support a FLP beneficiary, it should not have accepted the entity as a beneficiary in the first place.

Submitted by John Sicola on Mon, 2021-03-01 17:17

A trust has been named as beneficiary of IRA. How will proceeds be taxed upon death to the surviving child(trust beneficiary)?

Submitted by Alan - IRA critic on Mon, 2021-03-01 17:24

If the inherited IRA distributions will be accumulated in the trust, they will be taxed at the higher trust and estate rates. However, if the distributions are passed through to the beneficiary annually, they will be taxable at the beneficiary’s normally lower personal tax rate and reported on the beneficiary’s return. 

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