Inherited IRA with a trust as beneficiary
My client died in 2020. He wanted his living trust to be the beneficiary of his IRA due to family issues. Inside of the trust, there are instructions to create three shares and create three new tax ID numbers for their trusts. When I called Charles Schwab, they said we can break the Inherited IRA into three pieces but they all have to remain under the tax ID of the trust where it’s currently held. They claim if I create three shares and use their tax IDs related to their new trusts, that the entire distribution is fully taxable. By keeping under the tax ID of the trust and creating three shares, the funds will be taxed when distributed. Can you weigh on this and give your perspective?
Permalink Submitted by Bruce Steiner on Sun, 2021-08-15 00:05
I disagree.
If Schwab won’t cooperate, the trustees could open an inherited IRA at Schwab and then move it to an inherited IRA at a friendlier custodian, and then divide the inherited IRA at the new custodian.
It might have been simpler if the IRA owner had named the three new trusts as the beneficaries of his IRA.
Bruce Steiner