Qualified trust as bene, two minor EDBs
Client passes away, leaving their IRA to a qualified trust fbo their two minor children.
One child is 8; the other is 11. So, two different stretch RMD schedules; two different start dates for the 10-year window.
In a post-SECURE world, must we go solely by the age of the 11-y.o. (the oldest trust beneficiary), or can trustee split the bene IRA up into separate accounts (by 9/30 of year after year of death?) so each kid can get their specific RMD schedule and 10-year window?
Please and thank you.
Permalink Submitted by David Mertz on Mon, 2023-05-01 20:00
In this case, the separate account rules for determining RMDs do not apply and the applicable distribution period is based on the age of the oldest beneficiary, the 11-year-old. For a trust to qualify for separate account treatment for determining RMDs, at least one of the beneficiaries would have to be disabled or chronically ill, among other requirements. See page 14 of 2022 IRS Pub 590-B for more details.
Permalink Submitted by Robert Vashko on Mon, 2023-05-01 20:19
Thanks. I was hoping against hope that SECURE would have given a little more flexibility in this regard, but I knew the odds were stacked against me. That said, I don’t trust 590-B to give me the straight dope like I used to. 😉
Permalink Submitted by Alan - IRA critic on Mon, 2023-05-01 20:31
There does not appear to be any changes from the existing rules in which the separate account rules do not apply to trusts. Therefore, the beneficiary RMDs paid to the trust must be based on the 11 year old EDB, as well as the onset of the 10 year rule. It would have required a separate trust for the 8 year old to avoid this outcome.