dpb wrote:

- quote -

I don't know if this helps;

The entire passage reads;
----------------------------(from pub 590)
Trust as beneficiary. A trust cannot be a designated
beneficiary even if it is a named beneficiary. However, the
beneficiaries of a trust will be treated as having been
designated as beneficiaries if all of the following are
true.

1.The trust is a valid trust under state law, or would be
but for the fact that there is no corpus.

2.The trust is irrevocable or will, by its terms, become
irrevocable upon the death of the owner.

3.The beneficiaries of the trust who are beneficiaries with
respect to the trust's interest in the owner's benefit are
identifiable from the trust instrument.

4.The IRA trustee, custodian, or issuer has been provided
with either a copy of the trust instrument with the
agreement that if the trust instrument is amended, the
administrator will be provided with a copy of the amendment
within a reasonable time, or all of the following.

1.A list of all of the beneficiaries of the trust (including
contingent and remaindermen beneficiaries with a description
of the conditions on their entitlement).

2. Certification that, to the best of the owner's knowledge,
the list is correct and complete and that the requirements
of (1), (2), and (3) above, are met.

3. An agreement that, if the trust instrument is amended at
any time in the future, the owner will, within a reasonable
time, provide to the IRA trustee, custodian, or issuer
corrected certifications to the extent that the amendment
changes any information previously certified.

4. An agreement to provide a copy of the trust instrument to
the IRA trustee, custodian, or issuer upon demand.

The deadline for providing the beneficiary documentation to
the IRA trustee, custodian, or issuer is October 31 of the
year following the year of the owner's death.

If the beneficiary of the trust is another trust and the
above requirements for both trusts are met, the
beneficiaries of the other trust will be treated as having
been designated as beneficiaries for purposes of determining
the distribution period.

The separate account rules cannot be used by beneficiaries
of a trust.
----------------
If the trust is faulty in some regard, I believe the entire
IRA must be distributed, and taxed. You must verify that
1-4 are all valid, and act by Oct 31. As you noted prior,
the RMD is still required for the year of death, then the
RMD based on older beneficiary starts. Please see an expert
if the amount warrants it.

JOE

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dpb wrote:

- quote -

The section you are reading falls under the rules for
determining the RMD. The paragraph is telling you that if a
trust is the named beneficiary, it can not be the designated
beneficiary for purposes of the RMD. The trust beneficiaries
would be the designated beneficiaries (if the hoops are
jumped through) for purposes of the RMD. In this case, you
move your pointer up the page to the section called Multiple
Individual Beneficiaries.

I hope this explains your confusion.

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joetaxpayer wrote:
- quote -

Then what I'm 'cornfoozed' about is why is the section I
referred to even there? Seems moot if the other, in
essence, overrules, and a lot of verbiage to include if it
has no bearing. Can you shed any additional light there?

- quote -

I'd particularly like to know what you're thinking here...if
you're thinking of the "end of October of the year following
decedent's death", that will be the end of this month which
is part of why I'm after a resolution right now. At the
present it's not clear to me that is going to have a
bearing, but don't want to miss it if it is pertinent.

Thanks for the input, Joe.

--dpb

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joetaxpayer <joetaxpayer[at]nospam.com> wrote:

- quote -

While not appropriate in every case, it's fairly simple, on
the death of the second spouse, to write the trust so that
it creates separate trusts for each of the kids.

Simpler, though, is to not have IRA funds go into the trust.
The IRA allows beneficiary designation. It doesn't need to
go through probate in any case. So it doesn't need to use
the trust.

Stu

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dpb wrote:

- quote -

Well, as I posted, if all else was done right, you still are
subject to the quoted paragraph;

"separate accounts for IRA distributions purposes cannot be
created when a trust is named as beneficiary. This means
that all trust beneficiaries must use the age of the oldest
trust beneficiary, even if the trust terminates after the
IRA owner's death and the beneficiaries later transfer their
shares to separate properly titled inherited IRAs."

and the RMDs are now based on the oldest beneficiary.

It's unfortunate that these rules are so complex that
mistakes seem bound to happen. But, depending on the date of
death, you still have a chance to keep it from getting any
worse.

JOE

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joetaxpayer wrote:
- quote -


- quote -

Thanks for the reference, I'll see if I can find it at the
local liberry. I have asked the live folks, and (hopefully)
they're expert...

- quote -

Ouch! As I read further, it appears it's even more onerous
in that there's an earlier section in Pub 590 that says for
2006 the RMD is still based on the owners' age irrespective
of the beneficiaries' ages. If that holds, there's no
wriggle room on whatever one does w/ the account going
forward.

Also, what is most puzzling to me is the following sections
from Pub 590 which at least superfically, seem conflicting
(but I'm sure it's in the details of the interpretation but
I don't see the difference, at least yet).

"Trust as beneficiary. A trust cannot be a designated
beneficiary even if it is a named beneficiary. However, the
beneficiaries of a trust will be treated as having been
designated as beneficiaries if all of the following are
true.

1. The trust is a valid trust under state law, or would be..."
....

This seems to me to say that if the conditions listed are
met (which basically say the trust is valid and the
beneficiaries of the trust are clearly identified and some
various reporting and bookkeeping actions are taken in a
timely fashion), _then_ the beneficiaries of the Trust can
treat the IRA as if they were named beneficiaries. Is that
an incorrect interpretation?

But, even if so, it appears it will only help "down the
road", not for 2006 unless there's another loophole
somewhere.

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dpb wrote:

- quote -

Given the vague wording provided by the IRS regarding the
intricacies of inherited IRAs, I've relied on the works of
Ed Slott, IRA expert, and author of several books on the
topic, including "Parlay your IRA into a family fortune."
Even if (and you should) turn to a live expert, having this
book at the ready will at least give you some good
information to arm yourself.

As I read the chapter regarding a trust inheriting an IRA;

"separate accounts for IRA distributions purposes cannot be
created when a trust is named as beneficiary. This means
that all trust beneficiaries must use the age of the oldest
trust beneficiary, even if the trust terminates after the
IRA owner's death and the beneficiaries later transfer their
shares to separate properly titled inherited IRAs."

I can also tell you that the recalculation for each year's
RMD is different for inherited IRA that for the original
owner. For the original owner, he would go to table 3 and
look for the new divisor each year, and note that the
divisor does not quite decrease by one (e.g. at 95 the
divisor was 8.6, but at 96, it's 8.1.) For inherited IRAs,
you consult a different table (includes ages under 70) and
then each year decrease by one. In your case, the age of the
older beneficiary must be used.

JOE

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Can someone summarize the rules for inherited IRAs? I'm
trying to primarily obtain most flexibility in selecting
when have to take RMD's with, (I think) a prime need to
minimize income this year as have already taken a sizable
withdrawal from existing IRA and have other extraordinary
income that is pushing this year up...

Basic facts are as follows--decedent was 95 so that RMDs had
begun, the IRA names her trust as the beneficiary, the trust
in terms decrees a 50/50 split between the two heirs (both
over 60, under 70-1/2).

I think as I read 590, there could be a trustee-trustee
transfer to create two new IRAs with the assets split. I've
had difficulty interpreting the RMD options that would
apply.

Can anybody summarize options? I recognize quite probably
additional details may be pertinent and I'll try to provide,
I'm just not sure what will/won't be significant so rather
than ramble on further will try to answer questions...

Thanks for any pointers...btw, I have asked the local folks
(CPA/lawyer handling estate/investment counselor where the
IRA is held), am trying to do the self-education thing here
to try to make sure I understand what they're going to tell
me and whether they've covered all the bases and not
overlooked something.

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