Drew Edmundson wrote:

- quote -

My answer was brief regards the trust as I was looking for notes I had
regarding that situation. Sorry.

First, when setting up the trust, it can't be "funded". This runs
counter to what trust attorneys tend to do, normally, the trusts are
funded, to start the clock on having assets outside the estate, for
medicaid eligibility for example. I saw a story that someone was advised
to put the IRA in a trust while alive, that 'broke' the IRA, and taxes
were due. I am just offering a mistake the OP needs to avoid.

Second, if the trust has two beneficiaries, RMDs are based on the age of
the older one, so in this case, two accounts may be indicated, funded
from two separate IRA accounts.

OP didn't offer a reason for wanting the trust. If it's to restrict
withdrawals beyond any RMD, that's fine, but there's little to gain, in
my opinion beyond that. A trust adds an annual burden and removes
flexibility. When a young person inherits an IRA they can withdraw
larger amounts than RMD with an eye toward tax management. Similarly, an
older person with variable income can use it as a smoothing factor.
Of course the young one can just deplete the account at 21. That's not
good, and calls for a trust.

Joe
www.blog.joetaxpayer.com

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On Tue, 2 Sep 2008 00:05:59 EDT, joetaxpayer
<joetaxpayer[at]nospam.com> wrote:

- quote -

To answer your specific question the trust has to pay tax on
IRA distributions just like an individual or alternatively
the income is passed out to the beneficiary, depending on
the facts and circumstances.

--
Drew Edmundson, CPA
Cary, NC

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

nobody wrote:

- quote -

An IRA inside a trust is a tricky proposition and should really be
avoided. Not saying it can't be done, it's too easy to mess it up.

- quote -

The Roth beneficiary gets to take withdrawals over her lifetime, tax
free. In fact, under many situations, it's better for an older person to
convert their IRAs to Roth for purposes of estate planning, especially
if the beneficiaries have high incomes.

Joe
www.blog.joetaxpayer.com

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

"joetaxpayer" <joetaxpayer[at]nospam.com> wrote in message
news:z6SdnfaUBPO8wS7VnZ2dnUVZ_o_inZ2d[at]comcast.com...
- quote -

1) Can the IRA be contributed directly into a trust at time of death, and
then liquidated tax free inside the trust? Money from the trust would be
taxed at the time it is distributed out of the trust of course.

2) If the IRA is a Roth, does the person inheriting that Roth IRA and
withdrawing from it lose all of the tax-free distribution benefits of a
Roth?

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

NadCixelsyd wrote:
- quote -

As Phil stated, it depends. But for a start:
One should have the IRA account state its beneficiaries, i.e. the IRA
passes through its own docs, not the will of the deceased. If their is
no beneficiary on the account, and the will is consulted, the ability to
stretch payments is compromised.

The spouse of the deceased may treat the IRA as her own, and transfer it
to her own IRA, commingling it, if she wishes.

Non-spousal beneficiaries are permitted to take distributions over their
lifetime but must begin withdrawals the year after the owner dies. The
first withdrawal is taken based on their life expectancy (per IRS table)
and each year after, 1 is subtracted from that divisor. A bit different
from the normal RMD rules. Ordinary income is due upon withdrawal, but
there are no penalties for taking a distribution from a beneficiary IRA.

Beneficiary IRAs are not allowed to be converted to a Roth. Of course,
the spousal IRA, if transferred to her name is not treated as a
beneficiary IRA.

Joe
http://www.blog.joetaxpayer.com

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

"NadCixelsyd" wrote:

- quote -

The all-purpose answer to initially-posed tax questions applies: "it
depends."

In this case it depends on the nature of the beneficiaries and their
relationships to the decedent. See IRS Publication 590 for the basics and
your estate planner for the nitty gritty of planning for your demise.

--
Phil Marti
Clarksburg, MD

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

If one dies with money still in an IRA, what are the tax
consequences? Do the beneficiaries have options as to when to
withdraw the money? Is it taxable as of the date of death?

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >