Timing of distributions to beneficiaries from irrevocable trust
I will like to transfer my IRA money to an irrevocable trust after paying income taxes, and using my life time estate tax exemption. If I make my children as beneficiaries, when they will get the money ? Do they have to wait till my death to get the money or they can get it earlier ?
Permalink Submitted by Alan - IRA critic on Mon, 2021-04-05 15:40
You can make a trust your IRA beneficiary, but you cannot transfer IRA funds into a trust while you are living. If your children are the trust beneficiaries, the terms of the trust determine when funds are passed through to the children. Typically, the IRA will have to be distributed within 10 years to the trust, but the trust provisions may give the trustee discretion to retain the distributions in the trust. Trust tax rates are considerably higher than their individual tax rates, therefore controlling their access to the IRA distributions comes at a price.
The only way to get IRA funds to the children while you are still living is to take a taxable distribution, pay the taxes, and gift the proceeds (perhaps net after taxes) to the children.