Trust beneficiary of IRA
A client died recently with an IRA naming her trust as beneficiary. Two of her children are the named beneficiaries of the trust and all assets will be distributed to them. The children have different needs: one would like to keep the retirement assets in the IRA while the other may need some of his portion in the next few years. Is there a way to divide the IRA into 2 IRA accounts, one for each beneficiary, so they may proceed individually?
Permalink Submitted by Alan Spross on Tue, 2010-11-30 22:31
If the trust is allowed to terminate, the IRA can be assigned to the trust beneficiaries, who can then create separate accounts even though they cannot use the separate account rules to lower their RMDs. They would each be able to distribute as much as they wanted in excess of the RMD requirement.
If the trust cannot terminate and does not include provisions that allow the IRA to be distributed to the beneficiaries, then the IRA will have to be handled by the trustee in accord with the provisions of the trust. And those provisions include a wide array of provisions in dealing with the IRA distributions. The controlling factor is the trust provisions with respect to the IRA.
Permalink Submitted by eric grasse on Wed, 2010-12-01 18:43
Thanks! Finally got some direction from the custodian – trust will be sent to legal dept for review. Assume they will be looking at the trust as you described.