Inherited IRA in a Trust

Forum|Forum|1 year ago
November 20, 2024
1 reply
0 views

My father who passed away has a Trust and I am the Trustee. The Trust inherited his IRA and the custodian, Charles Schwab, is setting up 3 Inherited IRA accounts, 1 account for my father’s main Trust and 2 accounts for the Beneficiaries which my father’s lawyer created Sub Trusts for. His lawyer obtained Tax ID’s for all 3 accounts. The Schwab Estate Specialist said that Schwab will put the inherited money in the main Trust account and I can transfer the funds to the Sub Trusts per the Trust document. For example I will be transferring money from “The John Smith Trust” to “The Jane Doe Trust established by The John Smith Trust”. Is the IRS usually notified of such a transfer and will there be any tax implications? I just want to make sure that the money doesn’t get inadvertently taxed.

Best answer by dmertz

"Is the IRS usually notified of such a transfer and will there be any tax implications?"

No. The funds are only permitted to be moved by nonreportable transfer, not by distribution and rollover.

dmertzAnswer

Employee

"Is the IRS usually notified of such a transfer and will there be any tax implications?"

No. The funds are only permitted to be moved by nonreportable transfer, not by distribution and rollover.

trust812Author

Thanks for answering my question. There are 4 Beneficiaries named in the Trust. For 2 of those the lawyer created Sub Trusts. Using my original example the Trust document specifies when Jane Doe dies the other 3 Trust Beneficiaries inherit her IRA, each a 33% share. Would the money from her Sub Trust Inherited IRA account then be transferred to the main Trust Inherited IRA for 2 of the Beneficiaries and the Sub Trust Inherited IRA for the 3rd Beneficiary or would the money remain in her Sub Trust Inherited IRA for distribution to the remaining 3 Beneficiaries via K-1’s?

dmertz

Employee

The sub-trust should specify. I doubt that it would go to the main trust. RMDs for that share won't change, which, under the circumstances, would seem to need to be based on the oldest of the four.