Trust as a Bene for an IRA

Submitted by brcwm on Wed, 2023-07-19 21:23

Client passed away and the beneficiary listed a rev living trust. The rev trust says to distribute the remaining trust assets upon the death of the grantor to four kids free of trust. Since the beneficiary of the IRA specifically lists the revocable trust,

1) Does the IRA transfer to a Bene IRA owned by the Rev Trust, then distribute to the four kids (since it’s dissolving)?

2) Or, does the rev trust become a see through where the four kids can open up bene IRAs?



Submitted by Alan - IRA critic on Wed, 2023-07-19 22:07

  1. 1) Yes. Hopefully, the IRA custodian will cooperate with the trustee of the trust assigning the IRA out of the trust to the individual trust beneficiaries, who will then be able to manage their separate inherited IRA accounts.
  2. Whether the trust qualifies for look through only affects the RMD requirements. It does not affect the trustee’s ability to assign the inherited IRA out of the trust.
  3. Secure Act RMD rules are basically as before. The major determinant is whether the client passed on or after their RBD. SInce most trusts are qualified for look through, if see assume that this is the case here, the RMDs for the individuals will fall under the 10 year rule. There will be annual RMDs due in years 1-9 only if the client passed after RBD. Otherwise, no annual RMDs, just a requirement to drain the inherited IRAs by the end of 2033. Assignment out of the trust does not change the RMD calculations.
  4. It’s not clear why this IRA was left to a trust that must be terminated. It would have been easier to simply name the 4 kids as direct beneficiaries of the IRA and avoid all the red tape.
  5. As always, either the trust or the beneficiaries after assignment to their own inherited IRAs must complete the 2023 year of death RMD if the client did not do so. This can be done in any proportion between the 4.

 



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