Trust Beneficiary (IRA)
Client inherits Generation Skipping Trust IRA.
Client s required to take out an RMD annually
Questions
1) is her RMD taxed at the trust rate or her individual rate – I believe the RMD is taxed at the beneficiary’s personal (individual) income tax rate and reported as K-1 income – confirmation needed.
2) any dividends, earnings, etc. retained inside the IRA that are not withdrawn – are those taxed (at trust tax rates) or tax deferred until withdrawn?
Thank you
Permalink Submitted by Bruce Steiner on Fri, 2017-09-15 20:36
Are you sure the trust is required to distribute the amounts it receives from the IRA? That would destroy the benefits of having the trust as the beneficiary of the IRA. Over time, the IRA benefits would be thrown into the beneficiary’s estate, and would be exposed to the beneficiary’s creditors and spouses, whereas if the IRA benefits could be retained in the trust they would not be included in the beneficiary’s estate, and would be better protected against the beneficiary’s creditors and spouses.