Little-Known IRA Rules, Part 2: EDU #2645

If you would prefer to skip Jim and Chris chatting about Chris’s mild fall weather in Colorado, Jim’s Nashville trip, and upcoming Cumberland Gap hike and whitetail hunting trip, you can skip to 13:30.

Chris’s Summary
Jim and I continue our discussion of little-known IRA rules, centered on naming a trust as an IRA beneficiary. We cover when a trust may make sense, compressed trust tax brackets, a recap of see-through trust requirements, master trusts and subtrusts under SECURE, and moving an IRA out of a trust into separate inherited IRAs. We also look at which date starts the 365-day count under the once-per-year rollover rule.

Jim’s “Pithy” Summary
Chris and I pick back up on our list of little-known IRA rules, and if you want confusion, just involve a trust. A trust is a non-human. It’s a piece of paper. Yet the IRS will let it be treated as human for distribution purposes if certain rules are followed to the T. We’re not huge fans of naming a trust as IRA beneficiary, but I can concede a few situations, like a charitable remainder trust, or a trust that passes required distributions and proactive tax planning through to your child rather than giving them access to a large inheritance all at once. Want the trust to hold that money back from a spendthrift? That’s where compressed trust tax rates come in, and Chris shows how fast a trust hits the top bracket.

Ever heard of the master trust workaround, where a very creative attorney got a PLR so a 1-year-old wouldn’t have to stretch over the life expectancy of a 100-year-old? SECURE made that easier, though with some very strict rules. I bring in Moe, Larry, Curly, and Shemp to show who can stretch, who gets the 10-year rule, and how an IRA may be able to pass through a trust into separate inherited IRAs.

The once-per-year rollover rule may be the most confusing of the bunch. Everybody says you can only do one rollover per 365 days, but when does that 365-day count begin? I give an example where a second rollover was completed less than 365 days after the first and was perfectly acceptable, and another that may look fine but isn’t.