SECURE Act Oldest designated beneficiary 10 year rule
With the SECURE Act is there any need in an accumulating trust to be able to identify the designated beneficiary with the shortest life expectancy? In other words, if the designated beneficiary with the shortest life expectancy is only a few years the accumulating trust can still withdrawal all the funds from the retitled IRA in one lump sum on the 10th year of the death of the owner.
As result of this, and accumulating trust which has as beneficiaries all my children and their spouses including future spouses would be acceptable even though future (Unknown) spouses may be older than any of the children.
Permalink Submitted by Alan - IRA critic on Mon, 2021-04-12 17:54
There is no need to determine the oldest beneficiary when the 10 year rule applies as will be the case for most accumulation trusts. However, multi beneficiary trusts qualified for look through with an EDB will be eligible for LE RMDs in which the oldest beneficiary will be a factor. Detailed IRS Regs regarding such trusts have not been issued yet, and the new IRS Pub 590 B does not provide any additional detail for trust beneficiaries compared to the prior edition.
Permalink Submitted by Norman Cook on Mon, 2021-04-12 18:53
What about on accumulating trust in which there are 2 beneficiaries, beneficiary A is older than the owner of the IRA and beneficiary B Is more than 10 years younger than the original owner. Since beneficiary A is NOT more than 10 years younger than the owner he would be able to take distributions over his life expectancy, but much he can they still use the 10 year rule for both beneficiary A and B?
Permalink Submitted by Alan - IRA critic on Mon, 2021-04-12 20:49
Yes. The new Secure Act defined “multi beneficiary trusts” are only for the chronically ill or disabled and they get a carve out from the 10 year rule. While Ben A would have been an EDB if the IRA was left outright, being a discretionary trust beneficiary will trigger the 10 year rule since there will be some beneficiary down the line that is not an EDB. This seems to be the consensus pending IRS Regs on the subject. Of course, while the IRA must be distributed within 10 years, the distributions can remain in the trust if desired.
Permalink Submitted by Norman Cook on Mon, 2021-04-12 21:13
Thanks