Updates

PLRs Address Trust, Estate IRA Beneficiary Issues

08/03/2012


August 3, 2012 – The IRS continues to issue rulings granting favorable IRA distribution options to taxpayers who receive IRA assets through trusts or estates. This guidance, in the form of private letter rulings (PLRs), has increasingly granted beneficiaries of trusts and estates the option to have an inherited IRA set up in their name, when in fact, the trust or estate was the named or the default beneficiary of the IRA. The ability to control an IRA directly, rather than having the assets channeled only through the trust or estate vehicle, is a commonly sought option, but one that is not specifically provided in the regulations that govern beneficiary distributions from IRAs and employer plans. Thus the growing number of requests through PLRs.
 
PLR 201210045 describes an IRA whose only named beneficiary is a trust, with the deceased IRA owner’s spouse and two children named as the trust’s beneficiaries. Upon the taxpayers’ request, the IRS granted each the option to set up an inherited IRA. For required minimum distribution purposes, all were required to use the life expectancy of the spouse, the oldest beneficiary of the trust. The spouse may use the uniform lifetime table, the two children the single life expectancy table, for calculating distributions. This PLR may be accessed as follows.

http://www.irs.gov/pub/irs-wd/1210045.pdf

 
PLR 201208039 presents a more unusual situation—an estate IRA beneficiary that received IRA assets, then conveyed them to a trust. This trust was to then terminate and distribute all its assets (the IRA proceeds among them) to the deceased’s four children. In this PLR, the IRS allowed the four children to each establish an inherited IRA for their respective share.  This PLR may be accessed as follows.

http://www.irs.gov/pub/irs-wd/1208039.pdf



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