I am the sole beneficiary of an Inherited IRA in a Trust with my late mother's name. How do I declare the RMD?

[Anonymous_]

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@dmertz wrote:

The terms of the trust would probably determine if this income to the trust was required to be distributed to the trust beneficiary, but I believe if it is  distributed to the beneficiary (as was the case here), it would be a DNI deduction to the trust and taxable to the beneficiary.

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I agree, 100%.

However, the question remains as to who, exactly, is making the determination as to how much (if any) to distribute if the 10-year rule is applicable.

[dmertz]

The trustee of the trust is the one who determines and requests distributions to be made from the IRA to the trust, but that's not really relevant to how the income that is received and distributed is required to be reported.  The trustee of the trust has a fiduciary responsibility to request appropriate RMDs, but "appropriate" depends on the circumstances and the reason that the trust was made the beneficiary.

[Anonymous_]

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@dmertz wrote:

The trustee of the trust is the one who determines and requests distributions to be made from the IRA to the trust.....

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Except there is no way we can be assured that is the case without actually examining the trust instrument. The statement implies that the trustee has the discretion to determine the amount of the distribution (if any at all).

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@dmertz wrote:

The trustee of the trust has a fiduciary responsibility to request appropriate RMDs....

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That was my other point; if the 10-year rule applies here, then there are no RMDs (at least no annual RMDs, as the entire balance simply needs to be distributed anytime before the end of the 10-year period).

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@dmertz wrote:

.....that's not really relevant to how the income that is received and distributed is required to be reported. 

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Yes, and it appears as if someone is doing something wrong (or there is a misunderstanding) considering the limited facts presented.

[NCperson]

@Anonymous_ 

<<(at least no annual RMDs, as the entire balance simply needs to be distributed anytime before the end of the 10-year period).>>

as I read through your back and forth with @dmertz , this caught my attention.... I thought that based on the new IRS rules (and I appreciate they are still in draft form and the comment period just ended), that if the IRA owner was subject to RMD, then the "designated" beneficiary has to continue RMDs over the 1st 10 years after the owner's death; the balance must go to zero in the 10th year.

however, if the IRA owner died before RMD's were required, then yes, there is no RMD requirment, but the IRA must be still be liquidated by the end of the 10th year. 

here is a good article on the current status and discussion

https://www.wsj.com/articles/irs-regulation-retirement-account-heir-11651859171?mod=trending_now_new...

thoughts? 

[Anonymous_]

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@NCperson wrote:

thoughts? 

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My thoughts are that I generally know the rules, but do not know essential details other than what @Leaminda mentioned in an earlier post, to wit:

"I inherited the IRA and my brother is in charge of it.  It has to take a taxable RDM every year and be fully out of the IRA within 10 of her death."

[dmertz]

If the mother died after her Required Beginning Date for RMDs, the regulations proposed 4 months ago require annual distributions based on the single life expectancy of the beneficiary if the trust is qualified for look-through or based on the life expectancy of the mother if not qualified for look-through.  However, it was the belief during most of2021 was that annual RMDs would not be required, so it's not clear why this distribution in 2021 is being referred to as an RMD.  Assuming that this part of the proposed regulations becomes final without change, it's unclear what the IRS will say about 2021 RMDs not taken because of the belief that no annual RMDs were required whenever the 10-year rule applied.

When I said that the trustee determines the appropriate amount of the distribution, that assumes that the trustee is basing that determination on the terms of the trust.  I didn't mean to imply that the trustee necessarily has discretion in determining the amount.  I only meant it to imply that it's the responsibility of the trustee to tell the IRA custodian how much to distribute.

There's a good chance that the trust agreement was written before the SECURE Act was enacted, so the trust agreement might not produce the originally intended result given the changes in the law.

[Anonymous_]

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@dmertz wrote:

....the belief during most of2021 was that annual RMDs would not be required, so it's not clear why this distribution in 2021 is being referred to as an RMD....

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That was (is) one component of my confusion; if the 10-year rule applies then (annual) RMDs are basically irrelevant.

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@dmertz wrote:

I didn't mean to imply that the trustee necessarily has discretion in determining the amount.  I only meant it to imply that it's the responsibility of the trustee to tell the IRA custodian how much to distribute.

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Understood.

[Leaminda]

Again... thank you to all of your inputs!   My brother is calling his accountant to get advice.  I couldn't answer a lot of your questions.  But, we learned a lot from your answers.  When I get more info, I will update.