Inherited IRA by decedent’s trust RMD. RMD taken in time, but by the trust….. (not the individual taxation lighter)
The deceased individual was a widower, aged 87.
His date of death was 1/1/2018.
The beneficiary of his IRA was his trust.
Being that the deceased passed away 9 hours into 2018, he had not taken his 2018 RMD.
In handling his affairs his IRA was moved from his TRADITIONAL IRA, over to an INHERITED IRA but the RMD was not taken out.
The creation of the INHERITED IRA was a few months after his death.
In a scurry it was discovered that ZERO had been taken from the INHERITED IRA.
In the final days of 2018 a distribution was made from the Inherited IRA over to the decedent’s trust to satisfy tax year 2018 RMD. The factor used was the descendants age and the uniform table III.
Referring to IRS Pub 590 – B It states “you figure the RMD for the year in which an IRA owner dies as if the owner lived the entire year”
My question is that the custodian of the INHERITED IRA will be issuing a 1099-R to the decedent’s TRUST, in the trusts Fed ID number.
Can this income be directed to the LAST 1040 for the deceased? This would be the lowest taxable position since only the RMD funds are the only activity for 2018.
The custodian claims the 1099-R will only be to the federal ID number of the trust where the funds went,,,,, NOT the Social Security number of the deceased.
Permalink Submitted by Alan - IRA critic on Wed, 2019-01-02 23:46
No, any IRA distribution is taxable to the recipient, which in this case is the trust, and the IRA custodian is therefore correct. The trust will have to file a 1041 and can pass the IRA income through to the beneficiary(s) of the trust to be taxed at their 2018 tax rate unless the trust provisions require that the distribution must be retained in the trust. Because death occurred in 2018, the trustee of the trust has until 10/31/2019 to provide trust info to the IRA custodian which is one of the requirements for the trust to be qualified for look through treatment. If qualified, the RMDs for the trust starting this year will be based on the oldest trust beneficiary instead of having to be calculated using the limited remaining life expectancy of the decedent.
Permalink Submitted by Steven Davis on Thu, 2019-01-03 15:05
Thank you for the answer, in this case the trust is explicit that distribution to grandchildren is based on certain ages so it will not qualify for “look through” treatment. So the trust bracket will be used for 2018 taxation of the RMD based on decedent’s age in the last year of table III the “friendliest” table. 2019 RMD will be based on decedent’s age in the less friendly “single life” table I ,,,, and be onward as that factor, LESS a 1 each year.
Permalink Submitted by Alan - IRA critic on Thu, 2019-01-03 16:18
If the trust is to retain RMDs in the trust, that does not mean the trust will fail qualification for look through. While it does mean that the trust will pay taxes at the higher trust rates, if qualified the RMDs would still be based on the oldest beneficiary of the trust including remainder beneficiaries. If so, the RMDs will be much smaller and trust taxes therefore lower. See requirements that must be met for a trust to be qualified, Pub 590 B, p 12.
Permalink Submitted by Steven Davis on Fri, 2019-01-11 13:38
will look to your suggested spot in Pub 590 B pg 12thank you