Trust bene on an IRA – pre rmd age
We have a client that passed away at age 67.9 this past May. The ONLY beneficiary named on his IRA is a Living Trust for him and his wife. His wife is approximately 2 months older.
We have never had a client name a Trust as the beneficiary of their IRA, so we are in unchartered territory. The estate attorney says we should use the husband’s age for the first year and that RMD funds should be withdrawn by 12/31/11. Starting next year, and for subsequent years, we are to use the wife’s age to determine RMD.
Do RMD funds have to be withdrawn by Dec. 31, 2011 of this year?
Do we use the husband’s age at his death of 67 to calculate the RMD amount? He was three weeks shy of turning 68- so do we “round up” and use age 68? What table do we use? We are hoping to use the Uniform Table age 70, as the Single Life Table is so unfavorable.
For next year, what age do we use to calculate the RMD amount? Is it based on the wife?
Can we use the Uniform Life Table and start with age 70? Or do we have to use the Single Life Expectancy Table for her? The Uniform Life Table would be optimal for her as this Table is much more friendly.
We know that in 2012 there will be changes made. From reading the Trust document, it appears that a QTIP Trust will be established to hold the marital share, and a Family Trust will be established to hold the non-marital share.
Permalink Submitted by mk foss on Thu, 2011-10-20 20:32
No RMD is needed in 2011 because the decedent had not reached his required beginning date.
The beneficiary’s first RMD is due in 2012. If the trust is a “see through” trust, the surviving spouse’s age will be used with the Single Life Table to calculate RMDs.
There have been many letter rulings that allow a surviving spouse who is the trustee and the beneficiary of the trust to do a spousal rollover when a trust is the beneficiary. There are also rulings that allow the trust assets to be allocated between the spouses such that the IRA is allocated to the survivor. You’ll want to check with the family and your legal department to see if those circumstances would apply. You’ll want to be very careful to see what can and can’t be done without a ruling of their own.
If the trust does not qualify as a “see through” trust (most do), then the decedent’s age is used to calculate RMDs from the Single Life Table begimomg om 2012.
Permalink Submitted by Alan Spross on Thu, 2011-10-20 20:47
Mary Kay,
If the trust is not qualified, wouldn’t the 5 year rule apply?
Permalink Submitted by mk foss on Fri, 2011-10-21 16:23
Sorry, Alan is right. If the trust doesn’t qualify the entire balance must be paid out by the end of 2016. The original question about using the decedent’s life expectancy threw me. You would only use the decedent’s life expectancy if he had passed his RBD and had no beneficiary (and the agreement didn’t provide one) or a beneficiary without a life expectancy such as an estate, charity or nonqualifying trust.
Permalink Submitted by S Baukol on Fri, 2011-10-21 22:06
Thank you! This board is very informative!