Successor Beneficiary of Trust Owned Inherited IRA
Mom, age 80 having already begun taking RMDs dies in 2007- beneficiary was Trust for benefit of her daughter, age 50 at time of Mom’s death.
Trust took RMDs annually based on daughter’s remaining life expectancy as of 12/31/2008 and subtracted 1 each year.
Daughter dies in 2024 at age 66. Terms of the trust say upon daughter’s death the trust terminates and corpus goes to daughter’s two brothers. At time of death the Inherited IRA owned by the Trust was worth $250,000.
Question – What happens to the IRA owned by the Trust? Can the brothers open inherited IRAs for their share of the trust corpus or must the entire IRA balance be liquidated and then distributed to the brothers.
Howard
Permalink Submitted by Alan - IRA critic on Mon, 2025-02-03 18:55
If the IRA custodian will accept an assignment from the trustee out of the trust to separate inherited IRAs, the RMD schedule could just be continued by each brother. That would allow the stretch to continue for another 10 years, but the 10 year rule would apply.
Permalink Submitted by Howard Hook on Tue, 2025-02-04 18:29
Thanks Alan – If the custodian does not allow this – would the entire Inherited IRA account need to be liquidated and proceeds net of tax distributed to the brothers?
Howard
Permalink Submitted by Alan - IRA critic on Tue, 2025-02-04 21:53
If the custodian will not cooperate, a direct transfer to a custodian that will cooperate is a possibility.
Otherwise, since the trust provisions require distribution from the trust, you are correct that it would result in a taxable distribution without custodian cooperation.
There is no specific date for the trust to make the distribution, since she passed in 2024, there is some urgency to check out the options for assignment of the IRA out of the trust to allow the trust to terminate.