See-Through Trust Beneficiary

[GMK]

If a participant in a qualified plan dies, and the participant's named beneficiary is a See-Through trust, then the persons who are beneficiaries of the trust are treated as designated beneficiaries of the participant.

Does this include that the beneficiaries can split the trust account into their own separate personal accounts (if they do it by the end of the year after the year of the participant's death)?

Until the trust account is separated, does the plan pay the benefit, including RMD, to the trust or to the persons?

Before the trust account is separated, do you use the shortest life expectancy of the beneficiary persons to determine the RMD, or do you treat it as separate benefits and calculate an RMD for each as if they were the participant's named beneficiaries?

Thanks for answers. I'm just trying to understand how this works before I need to know how it works.

[GMK]

anyone?

[Bird]

First you need to determine the beneficiary for RMD purposes, by 9/30 of the year following death. That will resolve the question about using the shortest bene life expectancy or doing separate calcs.

I believe you could and probably should set up separate accounts within the plan.

Some of the answers might depend on the terms of the trust. I don't claim expertise, but...I think if the trust allows for a full distribution, then the bene(s) could set up beneficiary rollover IRAs and start and/or continue the RMDs from there (or whatever they want to do). If the trust bleeds out he money over a period of time, then everyone is stuck with the plan making payments to the trust, and the trust funneling the payments to the benes. Not always well thought out, e.g. if the plan wants to terminate and the trust says it stays in existence for the lifetime of the beneficiary, I'm not sure how that is resolved.

[GMK]

Thanks, Bird.

Today, I found this discussion of trusts as beneficiaries:

http://www.ctnaela.org/wp-content/uploads/2013/04/Part-III-TrustAsBene2013.pdf

What I've found so far is that the plan pays the trust, and the trust pays the trust beneficiaries (although at one point the possibility is mentioned that an arrangement might possible in which the plan pays the "separated account" beneficiaries directly ... have to read more).

For a See-Through trust, the beneficiaries can separate the account into individual accounts for almost all purposes, including RMD amount, but never for determining the applicable distribution period (ADP). The ADP is determined when the participant dies, and you're stuck with it.

Who gets counted as a beneficiary, and whether or not a non-person trust beneficiary can be excluded, can be very complicated.

Messy business. No question that if any of our participants who have named a trust as a beneficiary dies, step one is to consult with our ERISA attorney.