Trust As Beneficiary Of An IRA

[Guest J Singletary]

Assume a "qualifying trust" (meets the five requirements) is beneficiary of an IRA, the IRA owner is deceased, so the IRA is paying out over the life expectancy of the sole beneficiary of that trust. The trust terminates upon the 45th birthday of the trust beneficiary. Can that beneficiary elect to keep the IRA open past the age of 45 allowing the IRA to continue paying out over his life expectancy directly to him, or must the IRA pay out in a lump sum upon the trust's termination?

My inclination is to say that the IRA must pay out in a lump sum, since the named beneficiary is no longer in existence. Prop. Reg. 1.401(a)(9)-1, D-5 states "...distributions made to the trust will be treated as paid to the beneficiaries of the trust...", but that appears to only relate to the calculation of required minimum distributions, not who may receive them.

Has anyone run into this before? Has anyone seen a private letter ruling in this area?