Multiple Beneficiary Conduit Trust as IRA beneficiary

Submitted by Leesa Conley on Wed, 2023-03-29 18:09

Good afternoon,

We have an IRA owner who died in February 2023. She was past her RBD, and had satisfied her 2023 RMD. She had no children and listed her Revocable Trust as beneficiary of her IRA. The Revocable Trust was amended and restated in November of 2022. There are 8 beneficiaries of the trust, all receiving various percentages. There was a 9th beneficiary who was supposed to receive 53%, who is now deceased. The trust document states that the beneficiaries receive their shares “free and clear of trust.”
We are contacting the drafting attorney to request his guidance, but I thought I would ask for thoughts here too.
How should the assets flow? We have a brokerage account in the name of the client’s Trust. One recommendation was to empty the IRA into the Trust account and then disburse to the beneficiaries from the Trust account?
Thoughts and recommendations are appreciated. Thank you in advance.



Submitted by Alan - IRA critic on Wed, 2023-03-29 23:37

  • What is the approximate value of the IRA?  Did the 53% trust beneficiary pass prior to the IRA owner or after, and if prior, what provisions in the trust deal with that share? Does that share go to the other 47%?
  • You might ask the trust attorney what the purpose of this trust was if the assets are to be immediately distributed out of the trust.
  • RMDs to the trust or to the trust beneficiares will be based on the decedent’s LE if the trust is not qualified for look through, or the 10 year rule if it is. And in the latter case, annual RMDs will be required based on the age of the oldest trust beneficiary in years 1-9.
  • You should also verify if the deceased owner actually owned the IRA or was herself an IRA beneficiary.

Submitted by Leesa Conley on Thu, 2023-03-30 19:39

Thank you for your helpful responses to this “loaded question” The IRA is approximately $345k.  The 53% beneficiary passed prior to the IRA owner passing.  The trust does not speak to what happens to her sister’s portion unfortunately.  The assumption was it would go to the other 47%.  The other 47% is actually 8 different individuals…. We have contacted the trust attorney to ask him to interpret his document.The Trust is qualified.  Would there be a reason to not just pay everything out in year 1 and close the IRA.The IRA owner was the original owner and not a beneficiary.

Submitted by Alan - IRA critic on Thu, 2023-03-30 21:05

If the shares were equal, a total distribution to the trust and passed through to those beneficiaries would result in about 43k of taxable income to each, and no further tax deferral. Another option would be to assign the inherited IRA to the individuals remaining as separate inherited IRAs that they could stretch over the LE of the oldest beneficiary in years 1-9.  However, since the trust was recently redone, perhaps some of the IRA balance is needed to pay final expenses, taxes, legal etc., reducing the amount available to the beneficiaries. The trustee of the trust should also know the overall plan.

Submitted by Leesa Conley on Fri, 2023-03-31 13:21

Thank you for your thoughts and recommendations.  We are waiting to hear what the Trustee/drafting attorney intended by the way he drafted the trust.   Unfortunately, the shares aren’t equa.  4 beneficiaries are to receive 3% each…..  

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