Deceased IRA Owner's Beneficiary Is a Trust -- Is Transfer Taxable?

[Übernerd]

This individual designated his trust (which was revocable during his life but became irrevocable on his death) as the beneficiary of his IRA. Is the transfer taxable? We don't do much IRA work, so this is a new one on me. Any thoughts much appreciated.

[mbozek]

Distributions from an IRA are taxable to the recipient unless they are a tax free transfer to an ex spouse on account of divorce or represent after tax contributions.

[BPickerCPA]

You have to define what you mean by "transfer".

If you mean moving the assets from inside the IRA to the trust itself, that would be taxable, but that probably is also a bad move.

If, however, you mean transferring title on the account from the decedent's IRA to a beneficiary IRA in the name of the trust as beneficiary of the decedent's IRA (You have to be careful how the account is titled), that is not a taxable transfer. Nor is it taxable if the account is retitled as a beneficiary IRA for a trust beneficiary, if that is what is going to happen under the trust agreement.

I suggest you consult with a knowledgeable pro, before you take any action. Mistakes in this arena at this time would be irreversible.

[Appleby]

mbozek and Barry is right … I would add some comments from an operational perspective... as Barry suggested, some IRA custodians transfer inherited assets from the deceased’s IRA to an inherited IRA (in the name of the deceased and the beneficiary, using the TIN of the beneficiary). This transfer is usually done to facilitate post-death distributions made by the beneficiary to ensure that the tax reporting is done under the proper name and TIN. If this is the type of transfer to which you refer, then it is non-reportable and non-taxable.

[Übernerd]

Thanks for these very helpful responses. That definitely gets us started.