A client was a beneficiary of a family trust within which is an IRA. The client passed away and the new beneficiary is her son. Question is how to treat the IRA. Is it an inherited IRA or, if not, how will the required minimum distributions be calculated. Ironically the most recent newsletter addresses RMDs for inherited IRAs, but the question is what category does this fall into?
I’m still confused. The IRA in question is owned by or inside a trust. The beneficiary of that trust was taking RMDs each year based on the value in the single life table. She passed away. Her son is now the beneficiary of this trust. Question remains as to whether this new beneficiary has to abide by the formula using the single life expectancy or the inherited IRA rule that in 2024, according to Notice 2024-35 says no RMDs required?
Permalink Submitted by Alan - IRA critic on Tue, 2024-05-21 20:18
If we assume that the trust that inherited the IRA when the original owner passed was qualified for look through (the trustee should know), the 10 year rule will now require the IRA to be distributed to the trust by the end of the 10 year rule period. In years 1-9 of the 10 year rule the RMD schedule already being used by the trust must continue.
If the trust provisions allow the trustee to terminate the trust and the trustee proceeds to assign the inherited IRA out of the trust to the son, that would not change the above indicated RMD schedule.