[scmitc]

My father passed away and had money in an IRA Account. A Beneficiary IRA account has been set up and we've been told we can have funds disbursed over 5 years. The trust states that his living children get equal shares of his estate. We realize that once the money is pulled out of the Bene-IRA account it is taxable to the trust but we plan on then issuing K1 forms to the recipient(s) and have him/her include it in their individual income for taxes rather than the trust's. I'm wondering if once a disbursement is made from the Bene-IRA account to the trust's checking account for my "portion" - can the trust cut a check to MY DAUGHTER instead of me (to pay for tuition) and have the K1 from the estate be issued to her SS# rather than mine? She's in a much lower tax bracket. As long as I don't infringe on my other siblings' inheritance amounts - they don't care where my portion goes.
Sue

PS Thanks - "Atlanta Tax Expert" for your answer on my capital gains question yesterday - I don't need to set up a trust! :) If you did NOT get my "tip" via Paypal - please let me know.

[AtlantaTaxExpert]

Sue:

First, thank you for the tip; it has been posted to my PayPal account.

Second, your question is more a estate law question versus estate tax question. However, In my opinion, if neither the will nor the IRA beneficiary form designates your daughter as a beneficiary for the IRA, then I do not think the custodian can legally disburse the funds in her name under her SSN. The money is your money, and you are going to pay the taxes. Sorry about that.

However, the law regarding IRA disbursement has changed. I believe that you can retain the money in your OWN IRA until you turn 70.5 years of age. It would benefit you to double-check that with a local tax professional with experience in such matters.

[scmitc]

Atlanta Tax Expert - thanks for your response. The beneficiary of the BENE-IRA account is the trust - not an individual. When distributions are made from the BENE-IRA, the checks are made payable to the trust and go into it's checking account and are included as income to the trust through a 1099. The trust has the option to K1 those proceeds out to individuals but those individuals must pay income tax on it. Dad's will includes the grandchildren as inheriting part of his estate also. He never specifies which part of his estate the funds should be allocated to for us - he just gave %'s of his estate to each heir. He had money in stocks and bonds also. So, we're thinking when distributions come from the BENE-IRA account to the trust, those of us with kids are going to distribute that money to the kids up to the % indicated in his will for each grandchild. We then use their social security # for the K1 tax purposes. Sorry I forgot to include that info in the first round. Based on your first response - because my daughter is included in the inheritance - it sounds like this might work.

[AtlantaTaxExpert]

Given what you have just said, then I withdraw my objection.

As long as the trust does not violate the terms/percentages specified in the will, it should be okay to issue the money and the K-1 under your daughter's SSN.