Trust as beneficiary of retirement accounts
When a trust is named as the beneficiary of retirement accounts, does the 10 year rule for distributions to the trust beneficiary still apply? Are taxes paid when the retirement account proceeds are transferred to the trust or only when money is distributed to the trust beneficiary?
Permalink Submitted by Alan - IRA critic on Tue, 2025-09-30 12:06
The 10 year rule applies in most situations, but not for certain trusts for the disabled, or for conduit trusts with an EDB as the conduit trust beneficiary. When the 10 year rule applies, annual beneficiary RMDs based on the age of the oldest trust beneficiary will be due IF the owner passed after RBD. If owner passed prior to RBD, there are no annual RMDs, just full distribution by year 10.
For a conduit trust, the IRA distributions are passed through the trust to the trust beneficiary and taxed to that beneficiary. In such a situation, the trustee of the trust should DECLINE tax withholding for the IRA distribution.
For an accumulation trust that holds distributions in the trust, the trust will pay the tax on Form 1041 at the higher trust tax rates and may want withholding to be paid from the IRA distribution.