Qualified trust as bene, EDB spouse as bene of trust

Submitted by Robert Vashko on Fri, 2021-08-13 18:32

IRA Owner dies and leaves IRA to his grantor trust, which became non-grantor & irrevocable upon his death. Proper see-through trust.

Surviving spouse is bene of this trust. However, she is NOT trustee and does not have full rights of access to the trust assets. She is limited to a 5% withdrawal per year from the trust itself.

So, trust could lifetime stretch based off her life expectancy using Table I factors. Is there any way the trust could use Table III factors instead?

I don’t see how, since her access to the trust is limited, and she can’t effect a spousal rollover to place the IRA into her own name. She remains in bene status, and must use Table I factors, correct?

Am I missing anything?

Please and thanks.



Submitted by Alan - IRA critic on Fri, 2021-08-13 23:49

The Uniform Table cannot be used for trust beneficiaries, so Table I will apply with non recalculation (1.0 divisor reduction).  In addition, this is an accumulation trust, so the RMD method will depend on who the other beneficiaries are. Are they all individuals?  Are any of them entitled to any distributions before the surviving spouse passes. Did decedent pass prior to RBD? These details can effect the distribution period and even if the trust is qualified for see through. I assume owner’s death was post 2019 (subject to the Secure Act).

Submitted by Robert Vashko on Sat, 2021-08-14 00:17

Yes, owner’s death was post-2019, and pre-RBD.  Residual beneficiares (only entitled to trust assets after spouse dies) are decedent’s kids from a prior marriage.  All trust beneficiaries are natural persons.

Submitted by Alan - IRA critic on Sat, 2021-08-14 02:25

The trust will be able to be qualified for look through which avoids the 5 year rule, but experts such as Natalie Choate and Michael Kitces have concluded that an accumulation trust such as this will be subject to the 10 year rule since not ALL beneficiaries are EDBs. I assume that the decedent’s kids are no longer minors, but if both were EDBs along with spouse, the 10 year rule could be extended by the number of years that the first child reached the age of majority. As is the case with Secure, the official Regs have not been released, so there is a chance the end result could be different. 

Submitted by Bruce Steiner on Sat, 2021-08-14 23:49

WIth enough disclaimers it might be possible to get the IRA to the spouse who could then roll it over.
See my articles on this in the October 1997 issue of Estate Planning, https://www.kkwc.com/wp-content/uploads/2015/04/AR20050125164755.pdf , and the June 2015 issue of Trusts & Estates, https://www.kkwc.com/wp-content/uploads/2015/08/IRA-Rollovers-Making-this-option-possible.pdf 

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