[WSBAPT] Retirement account left to trust until age 35

[Paul H. Grant]

To begin with, you need to make sure that the trust created can hold IRAs as a qualified beneficiary. Thereafter, why would you have the trust end? Why not keep the trust active but give greater control to the beneficiaries and allow them to become the trustee of their own trust share. This eliminates the problem. But the trust needs to create individual trust shares from the onset so a beneficiary can utilize the IRA with their own life expectancy.  

Regardless of all the initial formation, if an IRA is put into an individual trust share then yes, it can be redistributed to the individual and continue the stretchout.  If the trust goes to a pot trust, then it becomes far more complicated and typically cannot be done.  A majority of trust I have ever seen do not accomplish these tasks so be very careful in creating it otherwise you may not receive the tax benefits you're seeking while adding the protections the client is seeking.

You can tell it's Friday… I feel like I'm rambling!  

Sent from my iPhone ~ Paul H. Grant

> On Feb 19, 2016, at 4:09 PM, Margaret Delp <delp at whidbey.net> wrote:
> 
> Hello Everyone: I have a client who wishes to leave her entire estate, including IRA and 401(k) account, to a trust for her 2 children.  She wants the trust assets distributed outright to them when the youngest reaches the age of 35
>  
> MY QUESTION:  what happens to the Trust's IRA at the termination of the trust when the beneficiary reaches age X? For example, let's say a child is the beneficiary of a trust (that meets the 1.401(a)(9) look through rules) and the trust says that all the assets in the trust will be distributed to the child when he attains age 35. Would the IRA have to terminate and distribute all of the assets to the beneficiary at that time (resulting in a potentially significant tax liability at that time), or could the tax deferral (stretch) be allowed to continue by transferring the remaining IRA account to an inherited IRA in the name of the beneficiary when he attains age 3r - thus allowing continued withdrawals over the beneficiary's remaining life expectancy
> Thank you!
> Margaret
> --
> Law Office of Margaret Delp
> 2815 Howard Road, Second Floor
> P.O. Box 292
> Langley, WA 98260
> (360) 579-4530 (telephone)
> (360) 512-3114 (facsimile)
>  
> This email is covered by the Electronic Communications Privacy Act, 18 U.S.C. Sections 2510-2521, and is legally privileged. This email was sent by an attorney or her agent, is intended only for the addressee's use, and may contain confidential and privileged information.  If you are not the intended recipient, you are hereby notified that any retention, dissemination, reproduction or other use of the information contained in this e-mail is strictly prohibited.  If you have received this email in error, please delete it and immediately notify the sender by reply email. Thank you for your cooperation.
>  
>  
> _______________________________________________
> WSBAPT mailing list
> WSBAPT at lists.wsbarppt.com
> http://mailman.fsr.com/mailman/listinfo/wsbapt
-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://mailman.fsr.com/pipermail/wsbapt/attachments/20160219/043d1ecf/attachment.html>