IRA – irrevocable trust beneficiary – need to amend trust with Secure Act
Client with IRA beneficiary as a pre Secure Act continuation trust – where beneficiaries treated as designated beneficiaries under the minimum distribution rules.
When the SECURE Act was first passed, it was recommended that trust wording be amended to remove required minimum distributions language . This is because most IRA experts believed the distributions would not be required until year 10.
Since then, Secure Act 2.0 now requires that the life expectancy tables be used for inherited IRAs where the owner had already begun their IRA RMDs. Does that mean that the continuation trust no longer needs to be amended to avoid taxation all in year 10?
Many thanks as always ….. Mary Dean
Permalink Submitted by Alan - IRA critic on Thu, 2023-04-13 02:29
Are you referring to conduit trusts where distributions are limited to RMDs? For those trusts subject to the 10 year rule without annual RMDs, there would be no distributions until year 10, and then a large tax hit. The IRS proposed Regs now require annual RMDs if the IRA owner passed on or after RBD, but there are still no annual RMDs if the owner passed prior to RBD, and that reduces the problem to that pre RBD segment, but it’s still a problem when the owner passes prior to RBD. That means that affected trusts would still need to be amended unless created post RBD.