Final Disposition of a Trust’s Inherited IRAFinal Disposition of a Trust’s Inherited IRA

When a decedent’s individual retirement account is payable to a trust under an IRA’s beneficiary designation, the day may come for the trust to distribute all of its interest in that IRA to the trust’s beneficiaries. When it does, custodians should routinely allow direct transfers to inherited IRAs set up for the benefit of each trust beneficiary entitled to receive a portion of the trust’s inherited IRA. It’s mystifying that some won’t. 

Although trusts are recognized as entities for purposes of the Internal Revenue Code and are treated as U.S. persons,¹ the IRC doesn’t fix rights to trust property. Applicable trust law does.

Uniform Trust Code 

The Uniform Trust Code (UTC), as adopted by many states, defines “trust instrument” to mean an ...