Testamentary trust and named beneficiary

[Guest Iwonder]

An urgent request for help from the estate/trust/pension professionals out there:

Is the named beneficiary of a testamentary trust, established for a deceased participant's pension assets, permitted to step into the shoes of the participant and remain in the plan, or is the trust itself the beneficiary.

[Guest mjb]

Who is designated as the beneficary of the deceased's interest under the plan, the trustee of the trust or the beneficary of the trust? Is the beneficary of the trust also the trustee of the trust?

[Guest Iwonder]

Who is designated as the beneficary of the deceased's interest under the plan, the trustee of the trust or the beneficary of the trust? Is the beneficary of the trust also the trustee of the trust?

The beneficiary of the trust is designated as receiving the deceased's interest. The beneficiary is not the trustee.

However, if you would let me know for future information: what if the trust were the designated beneficiary and/or the trustee?

To what extent is state law (rather than pension law) involved, i.e. the plan sponsor, trust, and spousal-beneficary are all in FL.

Thank you

[Appleby]

The answer depends on who you ask. Some financial professionals and financial institutions will treat the underlying beneficiary of the trust as the beneficiary of the retirement account and report distributions in the name and TIN of that individual.

Some will not, as they believe that the trust is the direct beneficiary of the account, and all distributions should be done under the name and TIN of the trust…most of these however will allow the pass-through to the underlying beneficiary, if the individual has their own private letter ruling.

Note than even in instances where the pass-through is allowed, the payout options must still be applies as if the trust is the beneficiary. For instance, if the retirement account owner dies before the RBD, and the trust is not qualified, the distributions must be completed within the 5-year period.

See PLR 200343030