Bypassing a See-Through Trust as Beneficiary
I have a client, age 82, who has a see-thru Trust named as the beneficiary of his T-IRA. His 2 children are age 51 and 47 and are identified as the Trust Beneficiaries and I think would be classified as non-eligible designated beneficiaries if the Trust is not a see-thru Trust. However, I have been told that the IRS July 2024 final Regulation allows the non-eligible designated beneficiaries of a qualified see-thru Trust to use the longer of the oldest beneficiary (age 51) to calculate the beneficiary RMD’s for both children. Is this correct?
Permalink Submitted by Alan - IRA critic on Sun, 2025-10-05 10:53
If the trust was not qualified, the trust would not be treated as having a designated beneficiary at all. But since it is qualified, the 10 year rule will apply and in years 1-9 annual beneficiary RMDs will be required based on the age of the oldest “countable” trust beneficiary under the terms of the trust.
Permalink Submitted by Jerry Bass on Mon, 2025-10-06 10:59
Thanks Alan. Do you know if there have been any Private Letter Rulings allowing the stretch option rather than the 1-10 year option?
Jerry Bass
Permalink Submitted by Alan - IRA critic on Mon, 2025-10-06 11:48
The Secure Act final Regs clarify that the stretch option could be used if the trust beneficiaries were both EDBs, but a child could only be an EDB if disabled or chronically ill as of the DOD. Otherwise, the 10 year rule applies with annual beneficiary RMDs equivalent to the stretch option in years 1-9, but those are cut off in year 10 by the total distribution requirement.
If one child was disabled (EDB) and the other was not, separate account rules could be applied to benefit the EDB only if the master trust was required to be split into sub trusts immediately after death, and the master trust terminated at that time.