Trust as IRA Beneficiary
I was recently looking at a Trust written in the 1990s so some of the language is a bit unusual. However, a large ($2M) IRA was left to the Trust. The Trust permits the Trustee to distribute the IRA however they see fit amongst the 4 beneficiaries. 3 Beneficiaries are in a high tax bracket and one is in a very low tax bracket. So from a tax perspective we would want the entire $2M to go to the one beneficiary, you will then take the money out over the allowed time period and pay the taxes and gift the net amount to the other 3 siblings (estate taxes aren’t an issue for this person as they have less than $1M of an estate while the other beneficiaries have $5M+ estates). However, I am struggling to decide if the 10-year rule or 5-year rule would apply here for distributing this IRA. The decedent died 2 years ago and nothing material has been distributed from the IRA as of yet. So now we have 8 or 3 years left depending on which would apply. It appears to be a “look through” trust, but again, it’s written in the 1990’s. How can I confidently determine which rule applies?? 5-year or 10-year? The estate attorney says to check with the CPA and I am the CPA haha. Thank you!
Permalink Submitted by Alan - IRA critic on Wed, 2024-02-07 21:43