Trust inheriting an IRA and annuity
A trust is the beneficiary of an IRA (traditional) and annuity (traditional employer plan). The trust is not a ‘see through’ trust. I’ve been told as the trustee to take the IRAs as lump sums. What tax withholding should we use? Would it be 37% since the trust IRAs are above $13k? I see 20% is mandatory but don’t want to have much in back taxes. Form W-4R has Single, Married or Head of Household; no idea where trust falls on that list.
Permalink Submitted by Alan - IRA critic on Mon, 2023-10-30 03:30
Why would you take a lump sum distribution? What are the trust provisions with respect to accumulating income, or does the trust give you the discretion to accumulate or pass through the income? Did the decedent pass prior to RBD or after? Note that the higher trust tax rates only apply to accumulated income held in the trust. If distributions are passed throught to the trust beneficiaries, they pay the tax at their personal tax rates. In that case you would decline withholding on distributions to the trust.