IRA Funds already inherited
L1: IRA Funds already inheritedNot a SEPP, but rather a RMD
Date of Birth 3/18/59
Distributions are currently being made as a RMD
My wife’s parents are deceased. When her father passed (1st) his IRA’s were passed on to the Trust. Now that her mother is deceased (passed at age 80) my wife cannot inherit the IRA as it’s been inherited already by the Trust.
She has been told that she can use her mother’s life expectancy to manage the distributions for the next 6.5 years. In addition to my wife she has two additional sisters who each are entitled to receive a third of the IRA money.
Can my wife take a single distribution of the IRA money and let her sisters either receive lump sum or timed distributions on their own or do they need to act in concert.
2012-10-01 18:23, By: JohnnyG, IP: [184.108.40.206]
L2: IRA Funds already inheritedThe RMD is the amount required to be taken out of the IRA and paid to the beneficiary of record. If the beneficiary is a trust, then the terms of the trust will determine how distributions are passed out of the trust to the trust beneficiaries.
If the trust was qualified for look through treatment (most are) then the RMDs are based on the oldest trust beneficiary (apparently her mother). 6.5 years appears to be about right depending on her age in the year after her husband passed.
If the trust is allowed to terminate OR the provisions allow the trustee to assign each successor beneficiary’s share to an inherited IRA for that beneficiary OR to allow the beneficiary to distribute their entire share of the IRA, then your wife can take out her entire share at that time. Unless the trust has some unique provisions, your wife should not be limited to what the others desire. If she wants a lump sum, there is no sense in setting up an inherited IRA for her even if the trust allowed it. Her share could just be distributed to the trust and passed through to her on a K-1.
Again, the terms of the trust will determine the options for the remainder beneficiaries of the trust.
2012-10-01 18:44, By: Alan S., IP: [220.127.116.11]
L3: IRA Funds already inheritedAs I have heard at every applicable seminar, READ THE TRUST. READ THE WILL.
You can never assume what to do with trusts or estates. You must read, and follow, the provisions in the documents. Many times they are written without a full understanding of the regulations, or withhout the taxpayer understanding the limitations or provisions they are including.
Usually I try to get clients to set up separate accounts for each beneficiary upon their death, so each beneficiary can act independently in their own best interest as to investments and distributions, and designating their own beneficiaries.2012-10-02 20:09, By: dlzallestaxes, IP: [18.104.22.168]