IRA Distribution Rules
Course: Retirement Planning
Lesson 1: Using IRAs to Build and Distribute More Retirement Income
Student Question:
Hi
I was doing a little further reading on the new IRA distribution rules and wanted to see if “conduit” or “accumulation” trust rules will be necessary information for the exam? As I understand it, trusts as beneficiaries are held to the “five-year rule” or the “payout rule” depending on the decedent’s age at death. But I’ve also read that beneficiaries of the Conduit Trust could still have access to some of the benefits that designated beneficiaries get.
I apologize if I’ve gotten off track and confused myself, but I wanted clarity in this so I can use this information as I’m working with clients day-to-day and I also want to make sure I don’t get tripped up on the test. Thanks for your help!
Josh
Instructor Response:
Hi Josh,
That’s a savvy question. It’s my pleasure to respond. Here’s my suggestion – in the relatively unlikely event you see a Conduit Trust question, just remember that:
- If any one of the Conduit Trust beneficiaries is not an Eligible Designated Beneficiary, then the “Stretch IRA” is not available to any beneficiary, and
- If a non-living beneficiary (e.g., Other Trust, Estate, Charity) is the beneficiary of a Conduit Trust, distributions must be made at least as rapidly as:
- The payout continuation method if the decedent died on or after his or her required beginning date, and
- Under the 5-year rule if the decedent died before his or her required beginning date.
Under the new distribution rules, it’s critical that you know:
- Who is and who is not an Eligible Designated Beneficiary
- The surviving spouse’s right to become owner or be treated as beneficiary
- The Stretch IRA is dead for non-Eligible Designated Beneficiaries
Onward and Upward,
Bruce
