trust as beneficiary
IRA owner dies, trust is beneficiary, proceeds paid out to beneficiary within last 3 months, can beneficiary roll over IRA, or is it all taxable now that custodian paid out to trust and it’s over 60 days?
IRA owner dies, trust is beneficiary, proceeds paid out to beneficiary within last 3 months, can beneficiary roll over IRA, or is it all taxable now that custodian paid out to trust and it’s over 60 days?
Permalink Submitted by Alan Spross on Fri, 2011-04-29 18:56
Any amount paid out of the IRA is taxable after 60 days. If a surviving spouse is the trust beneficiary and trustee, they MAY be able to take a full distribution and roll it over to their own IRA. Otherwise, the IRA distributions including RMDs are taxable to the trust, but if the trust passes the disrtibutions through to the trust beneficiaries on a k1, the taxes are paid by each beneficiary at their own marginal rates. If the trust is “qualified” for look through treatment as most of them are, the RMD amount is based on the oldest trust beneficiary. If the trust is eventuall allowed to terminate, the remaining IRA balance can be assigned to the trust beneficiaries.
As you can see the type and provisions of the trust determine what the options may be.
Permalink Submitted by Bruce Steiner on Fri, 2011-04-29 19:44
For more details on possibly getting the IRA to the spouse, see my article on that subject in the October 1997 issue of Estate Planning: http://www.kkwc.com/docs/AR20050125164755.pdf . If it’s possible to get the IRA to the spouse, it may be possible to get the IRS to waive the 60-day deadline for the rollover.
For more details on trusts and beneficiaries of IRAs generally, see my article on that subject in the March 2004 issue of BNA Tax Management’s Estates, Gifts & Trusts Journal: http://www.kkwc.com/docs/AR20041209132954.pdf .
If you can’t get it to the spouse, and if the trustees did not have to take the entire distribution all at once, the beneficiaries may want to consult with counsel to discuss whether they have a claim against the trustees, or against anyone else, for the value of the lost tax benefits.