I.R.A. beneficiaries for minors
If a conduit I.R.A. is no longer recommended, what do you suggest to keep the children from receiving the funds at majority age?
Also, if there is a conduit I.R.A. currently, what happens at majority age, does the amount get paid put in lump sum or will they be able to take the funds out over 10 years?
Frank
Permalink Submitted by Alan - IRA critic on Mon, 2020-04-20 19:01
The IRA will have to be left to a trust to avert access to the total balance upon reaching majority. Under a conduit trust distributing annual RMDs to eligible minor beneficiaries (child of IRA owner), the 10 year rule does not kick in until the beneficiary has reached the age of majority, and that could be extended to age 26 if the child is pursuing a course of higher education to be further defined by the IRS. If those cases, the IRA would not have to be liquidated until age 36. For accumulation trusts, the RMDs are held in the trust but the trust will be paying higher tax rates as a trade off for control of the funds.