dmertz
Level 15

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There have been many cases the IRS has issued written determinations to particular taxpayers allowing the inherited IRA maintained for the benefit of the trust to be split and trustee-to-trustee transferred out of the trust to inherited IRAs for the benefit of the trust beneficiaries, subject to the provisions of the trust.  However, many IRA custodians resist and it is sometimes necessary to transfer the IRA to an inherited IRA for the benefit of the trust at a different IRA custodian that is more accommodating.  Absent such transfers the trust will need to receive the distributions and file Form 1041 and Schedules K-1 to pass the income through to the trust beneficiaries.  The trust will need to remain open until all of the trust assets are distributed or transferred out of the trust.

 

Regardless, annual RMDs will be based on the age of the oldest trust beneficiary provided that the trust is qualified for look-through, which includes the requirement that the necessary documentation be provided to the particular IRA custodian by October 31 of the year following the year of death.  The separate account rules that would allow each beneficiary to use their own age does not apply when a trust is the beneficiary that was listed by the participant.  If the trust is not qualified for look-through, RMDs will be based on the beneficiary not being an individual.  See Trust as beneficiary in IRS Pub 590-B.

 

For what it's worth, if the trustee of the trust has complete control over the distribution of the IRA or the income from the IRA, making the trust the beneficiary of the IRA likely served no purpose other than to complicate matters with respect to the IRA.  It generally would have been better to directly name you and your brother as beneficiaries of the IRA, allowing the application of the separate account rules.