A:

Related information can be found in IRS publication 590. See page 32 (bottom right hand corner) and page 35.
If the trust is qualified, as described on page 35, distributions may occur over the life expectancy of the oldest beneficiary under the trust.

If the trust is not qualified, then the following applies:

  1. If the IRA owner dies before the required beginning date, the assets must be distributed by December 31 of the fifth year following the year the IRA owner died.
  2. If the IRA owner dies on or after the required beginning date, the assets must be distributed over the remaining life expectancy of the decedent.

The assets can't be rolled to a retirement account, but they can be transferred to an inherited IRA. When speaking with the financial institution, be sure to use the right terminology, as use of the wrong terminology could result in transactions that you do not want. When moving the assets to an inherited IRA, please check to make sure that any document you sign is not a distribution request, but a transfer request. If you sign a distribution request and the assets are distributed from the IRA, the amount will not be eligible to be rolled to an IRA and will be treated as ordinary income.

Please discuss the matter with the financial institution and a competent tax professional to ensure that all the necessary steps are taken to ensure compliance, as well as to ensure that you make the most financially suitable choices.

For more information about inherited IRA assets, check out Inherited Retirement Plan Assets – Part 1, Inherited Retirement Plan Assets – Part 2, The Importance Of Sept. 30 For Multiple Beneficiaries.

This question was answered by Denise Appleby
(Contact Denise)

RELATED FAQS
  1. Can I put my IRA in a trust?

    Learn the proper way to transfer ownership of your IRA to a trust. Consider how naming the trust as a beneficiary affects ... Read Answer >>
  2. If a trust is named as the beneficiary of an IRA, can the trustee of that trust become ...

    While the IRA owner is alive, only the IRA owner can change the designated beneficiary of the IRA. Exceptions may apply if ... Read Answer >>
  3. Can I, without tax penalties, use the IRA I inherited from my father to buy a home ...

    If you inherited an IRA from someone who was not your spouse at the time he/she died, the amounts that you receive as a distribution ... Read Answer >>
  4. My 80-year-old mother used her Roth IRA assets to make an $11,000 annual gift tax ...

    Under the current version of the law, any IRA or Roth IRA assets that are gifted while the IRA owner is alive are considered ... Read Answer >>
Related Articles
  1. Retirement

    Designating A Trust As Retirement Beneficiary

    Designating a trust as your IRA beneficiary can be beneficial, but it requires proper planning to avoid problems.
  2. Managing Wealth

    Managing Inherited IRAs: Distributions and Taxes

    If you have inherited an IRA account you don’t need to turn it over to the estate, regardless of what the will says.
  3. Financial Advisor

    Why You Need to Find the Right IRA Beneficiary

    It definitely matters who you pick as your IRA beneficiary—and how you go about it. And in some cases, your best option may be to go with a trust.
  4. Retirement

    Inheriting an IRA: Tax Rules You Should Know

    Don’t get hit with a 50% penalty because you don’t know the required minimum distribution (RMD) rules for IRA beneficiaries.
  5. Financial Advisor

    Inherited IRA and 401(k) Rules: Don't Run Afoul

    What you need to know when it comes to the complex rules for inherited IRAs and 401(k)s.
  6. Retirement

    A Look at Protecting Children With an IRA Trust

    Too many people make huge and irreversible mistakes when naming the beneficiaries for their retirement accounts.
  7. Retirement

    Moving Retirement Plan Assets: How To Avoid Mistakes

    Sometimes things go wrong in a simple transfer of funds. Make sure you know how to avoid penalties.
  8. Financial Advisor

    Passing an IRA to a Trust: The Good and Bad

    Creating a trust is a common estate planning tactic, but naming a beneficiary to an IRA to a trust may have unintended consequences.
  9. Retirement

    Roth vs. Traditional IRA: Which Is Right For You?

    To answer this question, you need to consider several of the factors we outline here.
  10. Retirement

    5 Secrets You Didn't Know About Traditional IRAs

    A traditional IRA gives you a current-year tax benefit and future years of tax savings – minus the income restrictions that limit who can have a Roth IRA.
RELATED TERMS
  1. Extended IRA

    An IRA that allows a second generation beneficiary to continue ...
  2. Five-Year Rule

    If a retirement account owner dies before the required beginning ...
  3. Inherited IRA

    An individual retirement account that is left to a beneficiary ...
  4. IRA Asset Will

    A document that specifies how the assets in an individual retirement ...
  5. Stretch IRA

    An estate planning concept that is applied to extend the financial ...
  6. IRA Rollover

    A transfer of funds from a retirement account into a Traditional ...
Hot Definitions
  1. Co-pay

    A type of insurance policy where the insured pays a specified amount of out-of-pocket expenses for health-care services such ...
  2. Protectionism

    Government actions and policies that restrict or restrain international trade, often done with the intent of protecting local ...
  3. Fiduciary

    A fiduciary is a person who acts on behalf of another person, or persons to manage assets.
  4. Demonetization

    Demonetization is the act of stripping a currency unit of its status as legal tender and is necessary whenever there is a ...
  5. Investment

    An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic ...
  6. Redlining

    The unethical practice whereby financial institutions make it extremely difficult or impossible for residents of poor inner-city ...
Trading Center