Pre-SECURE Act Conduit Trust Distribution
I have a beneficiary of a conduit trust that is turning 30 y/o and is now owed 1/3 of the balance of the inherited IRA held by the trust – this was established in 2017 after the passing of the sole remaining parent. This would be approx. $500,000. We’d like to open a new inherited IRA that can be held outside of the trust by the beneficiary to keep its qualified status. With this new inherited IRA, we are torn on whether it will still be able to utilize the stretch rules, or if it is now bound to the SECURE Act provisions. My gut tells me my beneficiary can still be utilizing the stretch rule, but would love guidance from anyone that has dealt with a similar situation. Thank you.
Permalink Submitted by Alan - IRA critic on Tue, 2025-01-14 16:06
The Secure Act does not affect this beneficiary. If the trust provisions allow the trustee to distribute the inherited IRA out of the trust by direct transfer to the trust beneficiary, the trust beneficiary can simply continue the existing RMD schedule.
Of course, the IRA custodian also must be open to accepting assignment of the IRA and not all are. If the custodian does not accept the assignment request, then the IRA will have to be transferred to another custodian that will. There have been years of PLRs in which the IRS clearly approves of these assignments, but some custodians still won’t cooperate.