Final Regulations Allow Separate Accounting for Trusts
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Final Regulations Allow Separate Accounting for Trusts

By Sarah Brenner, JD
Director of Retirement Education

By Sarah Brenner, JD

The recent final required minimum distribution (RMD) regulations include a new rule change that may be beneficial for IRA owners who name trusts as beneficiaries. In the new regulations, the IRS allows separate accounting for RMD purposes for more trusts. This can be helpful when a trust has beneficiaries who can potentially have different payout periods under the RMD rules.

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Q: If a client passed this year with four adult children inheriting equally, and each beneficiary is using the 10-year rule, how do they determine yearly required minimum distribution (RMD) calculations? Is it based on life expectancy or on a number that will empty the IRA within the 10 years?

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Q: Has there been any clarification on the requirement and time frame for required minimum distributions (RMDs) for inherited IRAs during the 10-year rule? Specifically, for inherited IRAs where a parent had already started taking RMDs and the beneficiaries are not eligible designated beneficiaries? I know that the IRS delayed the need to take RMDs over the last few years, but has that been clarified yet for the future?

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Q: We have a client who has children from a previous marriage. Upon the husband’s death, he wants to make sure his current spouse has access to income from his IRA. But he also wants to make sure the remaining balance, when she passes, goes to his children from his first marriage and not to someone else, e.g., her children. How best to make sure that happens?

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Q: I disclaimed one of my spouse’s IRAs and it went to our two adult children. They are withdrawing RMDs from this account as well as contributing to their own Roth and IRA accounts. Are there any rules regarding whether the inherited required minimum distribution (RMD) must be taken prior to contributing to your own account?

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