Retitling bene IRA from trust to bene directly

Submitted by Robert Vashko on Wed, 2023-05-17 22:39

I’ve come across several custodians who will allow a bene IRA left to a trust, to be retitled in the name of the trust bene directly, upon instruction from the trustee.

These custodians usually make clear that they are not creating any additional distribution options – the distributions to the individual will be exactly the same as if the trust had remained bene. But custodians allow this so a trustee is not forced to keep a trust open for 5 years or more solely to administer a conduit bene payout.

I am wondering – is there anything out there in terms of code, regs (including Q&As), memos, bulletins, etc., to back custodians up on this policy? In other words, are they flying 100% by the seat of their pants, or is there something they can point to in order to demonstrate that the IRS is OK with it?

Please and thank you.



Submitted by Alan - IRA critic on Wed, 2023-05-17 23:21

  • The IRS is definitely OK with assigning an inherited IRA out of a trust or estate, but for a trust the trust provisions must allow the trustee to do so. If it does not, the custodian should not accept an assignment request. It is correct that this does not alter the RMD, it just gives the trust beneficiary full control of their own inherited IRA meaning they can name their own successor beneficiary. 
  • Most major custodians, particularly brokers and mutual fund firms have been doing this for years, but there are a few that will not cooperate. These firms know full well it is permitted, therefore there stance reflects an attitude that inherited IRAs are not desirable for them. If the current custodian refuses to cooperate about all that can be done is a direct transfer to a new custodian that will comply. 
  • Unfortunately, the IRS has decided not to issue direct regulatory guidance on this, which allows non cooperating IRA custodian an excuse to refuse assignment requests. Perhaps the IRS feels this guidance is unnecessary, but the IRS has never contested assignments either by maintaining that an assignment is a taxable distribution. Can you imagine if an estate had to be kept open for many years to avoid a large lump sum distribution? 

Submitted by MIKE KRUCHTEN on Thu, 2023-05-18 12:22

Does the decedent name still need to be incorporated in the new naming? Many times I don’t see the decedent’s name in some Bene IRA registrations.

Submitted by Alan - IRA critic on Thu, 2023-05-18 16:35

Yes, the decedent’s name but not necessarily their DOD should be included in the titling of a beneficiary IRA including inherited IRAs assigned by a trustee or executor to the beneficiary.

Submitted by MIKE KRUCHTEN on Thu, 2023-05-18 20:26

Is the decendent name a best practice or requirement? Have had 2 bene IRA accounts transfer over from fairly large custodians recently with no decendent name in title. Not having  the decendent name slowed the transfer processs on my side but both contra firms claimed such was not a requirement. I have not been able to locate anything on IRS site stating it’s required.Any info confirming such would be great to have.Makes complete senae to me but seems custodians have differing views. 

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