Bequeathing to an adult child an IRA which has a Revocable Living Trust as its Contingent Beneficiary

Submitted by Patricia Corsilli on Wed, 2023-11-15 16:31

My husband and I want to bequeath 3 IRAs to our adult son when we pass. We are both taking RMDs. These IRAs have our Revocable Living Trust as Contingent Beneficiary. We want our Trustee to oversee the distribution of these for 10 years (as per the SECURE 2.0 Act) so that our son receives a small, steady stream of income from two of them and uses the distribution from the third for his own IRAs. We have heard that because the IRAs will pass through a Trust before distribution, our son will have a large tax bill immediately and only be able to draw down the contents of the IRAs according to the Single Life Expectancy Tables, not the 10-year window. First, is this true? Secondly, how can we avoid this? We don’t want to assign our son as Contingent Beneficiary because that will put those assets into our estate and therefore pass through probate and remove our Trustee’s oversight. Also, we are not interested in opening an annuity for him. We would like to use our IRAs as an annuity. Any feedback on if what we are understanding is correct and any suggestions on how to reach our goals.?



Submitted by Alan - IRA critic on Wed, 2023-11-15 17:43

  • If the trust inherits any of these IRAs, because both owners are past their RBD, there will be annual RMDs required to the trust in years 1-9, with a full distribution required in year 10. If the primary beneficiary is still living when the IRA owner passes, the trust will only inherit if the living beneficiary files a qualified disclaimer within 9 months of the prior death. 
  • I assume that your son is not disabled or chronically ill. If he was, the 10 year rule could be avoided if the trust is qualified for look through. To be qualified, not only must the trust be drafted correctly, but the trustee of the trust must submit the trust info to the IRA custodian no later than 10/31 of the year after the year the trust inherited the IRA. 
  • What is the reason for not leaving the IRA to the son outright? Are you concerned he would blow through the inherited IRA even faster than say 1/10 of the balance each year for 10 years? Does he need creditor protection for these assets including from spouses?
  • No matter how you set up the beneficiary, the IRA balance will be included in your gross estate for estate tax purposes. 


Add new comment

Log in or register to post comments