Testamentary Trust Question

Submitted by Joe Marmorato on Tue, 2022-09-27 19:39

Hello –

If someone has a testamentary trust named in their will for their minor children, I understand that they should qualify as eligible designated beneficiaries and can stretch distributions.

However, if the will says that when a minor child reaches age 18, the trust must be divided accordingly and that portion is distributed to the child. Does this require the trust to distribute half of the IRA? Or can the inherited IRA be retitled to the individuals name so that they continue the stretch until they reach age 21, then the 10-year window kicks in.



Submitted by Alan - IRA critic on Tue, 2022-09-27 23:28

  • It would be much simpler if separate trusts were created for each child, since they will likely reach age 18 in different years. The following assumes that the trust(s) are qualified for  look through. The trust could either be conduit or accumlation trusts, with the latter the better choice. 
  • With a single qualified trust, the life expectancy RMDs paid to the trust will be based on the age of the oldest child. When that oldest child reaches 18, the trustee of the trust must assign the % of the IRA balance allocated to said child out of the trust to a separate inherited IRA, to which continued LE RMDs will be paid until age 21 and the 10 year rule will kick in for that inherited IRA starting in the year after the child reaches 21. In the unlikely chance that the IRA owning parent passed after RBD, the LE RMDs must continue in years 1-9 of the 10 year rule.
  • Meanwhile, the younger child must continue LE RMDs until 18 using the LE of the older child, then the trustee would assign the remaining inherited IRA out of trust at that time, the LE RMDs would continue 3 more years and the 10 year rule would then kick in. 
  • It would probably make more sense for the trusts to continue to age 21 instead of age 18.


Submitted by Joe Marmorato on Wed, 2022-09-28 13:08

This is super helpful. Thank you so much!!



Submitted by Norman Cook on Wed, 2022-09-28 19:11

Depending on the size of the account and the “spending habits” of the children it may be better to spread the distriabution from the trust over a period of 5 to 15 years and not all at once at age 18 or 21



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