To late to fix see thru Trust as IRA bene

Submitted by MIKE KRUCHTEN on Thu, 2023-05-11 02:19

Client age 60 passed Aug 2021, her Trust was 100% Primary bene.

Trust is qualified and has 4 clear beneficiaries. IRA Custodian claimed they don’t handle see thru trusts and could only have Trust as Bene IRA owner not see thru to the 4 bene’s.

Trustee accepted this information and moved the deceased IRA to a Bene IRA before 9/30/22.

I assume no but can the Bene IRA owned by the Trust still correct this at another IRA custodian and have 4 Bene IRA created for each trust bene?

What would recourse/solution be in future when IRA Custodian refuses to split 4 ways?

Trustee knew the 9/30/22 deadline was fast approaching so relented.



Submitted by Alan - IRA critic on Thu, 2023-05-11 15:08

  • If the IRA custodian is not able or willing or willing to handle a see through trust, they should have so advised the IRA owner who could then have transferred the IRA to another custodian. The trustee of the trust could also have transferred the inherited IRA to another custodian before the deadline (10/31/2022) to submit the trust information to the custodian. Did the trustee submit the trust info by 10/31 or not?  
  • One of the requirements to be qualified is that the trust becomes irrevocable when the owner passes. The trust needed to specify that separate sub trusts were to be created upon the owner’s death. If it does not, it’s too late now. Do the trust terms include discretion for the trustee to terminate the trust? If so, the trustee could assign the inherited IRA to separate inherited IRAs (outside of the trust), but this would not change the 5 year rule for complete distribution of these IRAs by the end of 2026.
  • Not sure what you meant with your final statement. What did the trustee of the trust do or not do in 2022? Simply having the IRA retitled with the trust as beneficiary did not eliminate the option to transfer the IRA to another custodian. Sounds like the trustee of the trust did not make an effort to address this problem prior to 10/31/2022 by a transfer, etc.
  • What was the IRA owners motivation to leave the IRA in trust? Are the beneficiaries spendthrifts needing creditor protection? 

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