inherited IRA

Our client had an IRA worth about $2.5 Million at the time of his death in August, 2022. The client’s assets are at a brokerage firm and are being transferred to a new investment banking firm (New Firm).
As the client is deceased, the New Firm advises they cannot set up an IRA account but rather need to do an Inherited IRA Account.
The client, a widow, has designated the beneficiary of his IRA as the Family Trust. All of the Inherited IRA will ultimately be transferred to a subtrust of the Family Trust for one son. However, the agreement and documentation to create this subtrust may take a month or two.
The New Firm suggests that we create an Inherited IRA with the Family Trust as the beneficiary. When the paperwork and agreement to create the subtrust for the son is finalized, the Inherited IRA would be transferred to an Inherited IRA for the son’s subtrust.
Is this approach correct? We need to be certain we are not creating a taxable event by these transactions.



What was the beneficiary designation of the IRA at client’s death, the widow or the trust?

was the trust, wife predeceased him

An inherited IRA must be established for the trust beneficiary as named by the client. However, the trust information had to have been submitted to the first IRA custodian no later than 10/31/2023 or the trust and all subsequent sub trusts created by the family trust will not be qualified for look through. Was this done? 
If the inherited IRA is then transferred to a new custodian, that custodian will have to know if the trust is qualified or not since RMDs are affected. How old was client at his death?
Transfers of inherited IRAs to subtrusts created by the original trust are not taxable distributions unless the beneficiary is changed to an entity not authorized in the original trust. A trust attorney (usually the one that drafted the family trust) should be consulted if there is any ambiguity in the trust language regarding the sub trusts. RMDs are not affected by subtrusts created later under language in the family trust, which became irrevocable at client’s death.

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