Assigning the right of inherited IRA assets- what are the effects?

[Guest Shelton]

The RMD regulations state that is a trust is the beneficiary of the IRA, the spouse cannot be treated as the beneficiary of the IRA, even if s/he is the only beneficiary of the trust.

Yet, the code talks about assigning rights, and seems to suggest that is the trust beneficiary assign the right to an individual, the individual will be treated as the beneficiary. Does this means that the individual will be able to move the assets into an inherited IRA in their name and tax ID number?

[BPickerCPA]

The regs don't say that the spouse won't be the beneficiary, just that she will not be permitted to treat the IRA as her own. This treatment does not preclude a rollover. The IRS has permitted rollovers under certain circumstances.

Also, a trust can assign the right to receive the IRA proceeds to an individual. In that case the individual will then control the investments in the IRA, and their SSN would be used for the reporting of distributions.

This does NOT necessarily mean that the individual will be deemed the designated beneficiary for determining the payout period. These are two separate issues.

[mbozek]

S: there are several ways the spouse can become the beneficiary of the decedent's IRA but you need to consult with counsel to see if it is possible. One way is for the trustee to disclaim the interest in the IRA under IRC 2518 which requires that the disclaimer be made within 9 months and that the beneficary not recieve any property or interest from the disclaimed property. The new IRS MRD regs allow the disclaimers to be made until Sept 30 of the year following the year of death. After the trustee disclaims then the IRA benefits should be distributed under the terms of the custodial account. Most custodial accounts name the surviving spouse as the default bene if there is no designated bene. If not then each person in sucession before the spouse can disclaim until the spouse is the default bene and can transfer the funds to her own IRA. I am assuming that there will be no problem in securing the proper disclaimers. Another way to rollover the funds is if the spouse is both the sole trustee of the IRA and the sole beneficiary of the trust. Under the merger of interest doctrine if the interest is identical because the same party is both trustee and beneficiary then the trust is dissolved and the spouse can rollover the funds. However this issue depends on state law. The IRS has issued many PLRs approving the above transfers as well as other ways of effectuating a tax free rollover.