Friday, October 7, 2011

IRA Trust October Deadline

Was a trust the beneficiary of a retirement account owner who died last year? Will there be stretch distributions to the trust?

If so, then the trustee of the trust has until October 31 of the year after the death of the IRA owner or plan participant to provide a copy of the trust (or a list of the trust beneficiaries and their entitlements) to the IRA custodian or plan administrator. If this deadline is missed, the trust cannot be treated as a see-through trust.

What does that mean? It means that you cannot do stretch distributions to the trust using the age of the oldest trust beneficiary. It means that the trust will be treated as a non-living beneficiary - like an estate or charity. It means that if the account owner died before age 70 ½ (actually April 1 of the year after attaining age 70 ½), then the total account balance must be distributed to the trust by the end of the fifth year after the account owner’s death. If the account owner died after age 70 ½, then distributions to the trust can only be made over the account owner’s remaining life expectancy.

Most of all, it means that the trustee of the trust needs to be sure to make a copy of that trust and send it off to the IRA custodian or plan administrator right now. Consider using a form of delivery that will provide you with a confirmation - just in case. Things get lost so easily in the world of big companies.

By IRA Technical Consultant Beverly DeVeny and Jared Trexler
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*Copyright 2011 Ed Slott and Company, LLC