29 Jan Will a trust extend an inherited IRA distribution period?

Q. I intend to leave my son and daughter an inherited IRA. My daughter will get it directly, but my son is not as savvy with money so he will get the inherited IRA in a trust. I understand the new IRA rules from the SECURE Act will make it necessary for my daughter to empty the account in 10 years. Does the trust have different rules?
— Planning

A. The passage of the SECURE Act has led to lots of questions about how inherited IRAs must now be handled.

No longer can beneficiaries stretch their distributions over their lifetimes.

You’re correct to say your daughter will need to take out all the money from the inherited IRA over 10 years.

For your son, you can establish a trust that will receive the proceeds from the inherited IRA over the required 10-year period, said Martin D. Hauptman, an attorney with Mandelbaum Salsburg in Roseland.

The trust is often referred to as an accumulation trust, he said.

Hauptman said the trust will receive the funds and pay the income tax over a 10-year period as required by the SECURE Act, and then the proceeds can be distributed in the trustee’s discretion over a longer period of time.

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This story was originally published on Jan. 29, 2020.

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