I realize this is not a tax question but I am hoping someone will have a suggestion.on all the money first. I certainly am not going to do that.
Most of my money is in either a 401(k) or IRA account. I have one child and she is beneficiary to all of the accounts. She also has a spending problem. I thought I could put my accounts into a trust but apparently I can’t do that without paying taxes
Is there anything I can do to control her access to that money? Needless to say I want her to be able to get money when she needs it but I don’t want her taking a lot out frequently. She is disabled and has no savings. I consider this money to besome thing to help her get through her senior years. She doesn’t think that way.
I would appreciate any help. Thank you!
I realize this is not a tax question but I am hoping someone will
have a suggestion.
Most of my money is in either a 401(k) or IRA account. I have one
child and she is beneficiary to all of the accounts. She also has
a spending problem. I thought I could put my accounts into a trust
but apparently I can’t do that without paying taxes on all the
money first. I certainly am not going to do that.
Is there anything I can do to control her access to that money?
Needless to say I want her to be able to get money when she needs
it but I don’t want her taking a lot out frequently. She is
disabled and has no savings. I consider this money to be some
thing to help her get through her senior years. She doesn’t
think that way.
Jane wrote:
I realize this is not a tax question but I am hoping someone will
have a suggestion.
Most of my money is in either a 401(k) or IRA account. I have one
child and she is beneficiary to all of the accounts. She also has
a spending problem. I thought I could put my accounts into a
trust but apparently I can’t do that without paying taxes on
all the money first. I certainly am not going to do that.
Is there anything I can do to control her access to that money?
Needless to say I want her to be able to get money when she needs
it but I don’t want her taking a lot out frequently. She is
disabled and has no savings. I consider this money to be some
thing to help her get through her senior years. She doesn’t
think that way.
Consider removing her as the beneficiary and naming your trust, or
even a new trust set up just for this, as the beneficiary. This
trust can set limits to control the spending.
Taxed and Spent <nospamplease@nonospam.com> wrote:
Jane wrote:
I realize this is not a tax question but I am hoping someone will
have a suggestion.
Most of my money is in either a 401(k) or IRA account. I have one
child and she is beneficiary to all of the accounts. She also has
a spending problem. I thought I could put my accounts into a
trust but apparently I can’t do that without paying taxes on
all the money first. I certainly am not going to do that.
Is there anything I can do to control her access to that money?
Needless to say I want her to be able to get money when she needs
it but I don’t want her taking a lot out frequently. She is
disabled and has no savings. I consider this money to be some
thing to help her get through her senior years. She doesn’t
think that way.
Consider removing her as the beneficiary and naming your trust, or
even a new trust set up just for this, as the beneficiary. This
trust can set limits to control the spending.
The problem is that all the money in the IRA would be subject to
income tax when OP dies. That's something she is trying to avoid.
Is there anything I can do to control her access to that money?
On 8/2/21 9:51 AM, Taxed and Spent wrote:
Is there anything I can do to control her access to that money?
ISTM the OP's real question was, quote "Is there anything I can do to
control her access to that money? "
Apparently the heir would spend it all as fast as possible.
Taxes are a secondary issue.
I realize this is not a tax question but I am hoping someone will have a suggestion.on all the money first. I certainly am not going to do that.
Most of my money is in either a 401(k) or IRA account. I have one child and she is beneficiary to all of the accounts. She also has a spending problem. I thought I could put my accounts into a trust but apparently I can’t do that without paying taxes
Is there anything I can do to control her access to that money? Needless to say I want her to be able to get money when she needs it but I don’t want her taking a lot out frequently. She is disabled and has no savings. I consider this money to besome thing to help her get through her senior years. She doesn’t think that way.
I would appreciate any help. Thank you!
On 8/1/21 8:44 AM, Jane wrote:taxes on all the money first. I certainly am not going to do that.
I realize this is not a tax question but I am hoping someone will have a suggestion.
Most of my money is in either a 401(k) or IRA account. I have one child and she is beneficiary to all of the accounts. She also has a spending problem. I thought I could put my accounts into a trust but apparently I can’t do that without paying
some thing to help her get through her senior years. She doesn’t think that way.
Is there anything I can do to control her access to that money? Needless to say I want her to be able to get money when she needs it but I don’t want her taking a lot out frequently. She is disabled and has no savings. I consider this money to be
I'm confused by the answers to this query. If the owner wants to
I would appreciate any help. Thank you!
control (limit) how much money is distributed from an IRA that is going
to a sole beneficiary (daughter), then the owner needs to create a
conduit trust as the IRA beneficiary with the daughter as the trust beneficiary. This makes the daughter an EDB (eligible designated beneficiary) under the Secure Act.
As such, RMDS would still use the old stretch IRA rules. The trust could limit annual distributions to the named beneficiary to be no more than
the RMD.
There are many investment firms that operate as IRA custodians and also provide "trusteed IRA" services.
What am I missing here?
I'm confused by the answers to this query. If the owner wants toSo Alan, you are saying the distributions to my daughter's spending could be controlled with a trust without the need to pay tax on ALL of the money in the 401k and IRA up front? I was under the (hopefully mistaken) impression that when 401k monies are
control (limit) how much money is distributed from an IRA that is going
to a sole beneficiary (daughter), then the owner needs to create a
conduit trust as the IRA beneficiary with the daughter as the trust beneficiary. This makes the daughter an EDB (eligible designated
beneficiary) under the Secure Act.
As such, RMDS would still use the old stretch IRA rules. The trust could limit annual distributions to the named beneficiary to be no more than
the RMD.
There are many investment firms that operate as IRA custodians and also provide "trusteed IRA" services.
What am I missing here?
So Alan, you are saying the distributions to my daughter's
spending could be controlled with a trust without the need to pay
tax on ALL of the money in the 401k and IRA up front? I was under
the (hopefully mistaken) impression that when 401k monies are put
into a trust tax has to be paid on all of it at once.
Jane <jblatz2@gmail.com> wrote:
So Alan, you are saying the distributions to my daughter's
spending could be controlled with a trust without the need to pay
tax on ALL of the money in the 401k and IRA up front? I was under
the (hopefully mistaken) impression that when 401k monies are put
into a trust tax has to be paid on all of it at once.
Yes, that can be done. Here's what the IRS says in Publication 590-
B:
"A trust can't be a designated beneficiary even if it is a named
beneficiary. However, the beneficiaries of a trust will be treated as
having been designated beneficiaries for purposes of determining
required minimum distributions after the owner’s death (or after the
death of the owner’s surviving spouse described in Death of surviving spouse prior to date distributions begin, earlier) if all of the
following are true.
"1 The trust is a valid trust under state law, or would be but for
the fact that there is no corpus.
"2. The trust is irrevocable or became, by its terms, irrevocable
upon the owner's death.
"3. The beneficiaries of the trust who are beneficiaries with respect
to the trust's interest in the owner's benefit are identifiable from
the trust instrument.
"4. The trustee of the trust provides the IRA custodian or trustee
with the documentation required by that custodian or trustee. The
trustee of the trust should contact the IRA custodian or trustee for
details on the documentation required for a specific plan.
"The deadline for the trustee to provide the beneficiary
documentation to the IRA custodian or trustee is October 31 of the
year following the year of the owner's death."
On 8/1/21 8:44 AM, Jane wrote:
I realize this is not a tax question but I am hoping someone will haveI'm confused by the answers to this query. If the owner wants to
a suggestion.
Most of my money is in either a 401(k) or IRA account. I have one
child and she is beneficiary to all of the accounts. She also has a
spending problem. I thought I could put my accounts into a trust but
apparently I can’t do that without paying taxes on all the money
first. I certainly am not going to do that.
Is there anything I can do to control her access to that money?
Needless to say I want her to be able to get money when she needs it
but I don’t want her taking a lot out frequently. She is disabled and
has no savings. I consider this money to be some thing to help her get
through her senior years. She doesn’t think that way.
I would appreciate any help. Thank you!
control (limit) how much money is distributed from an IRA that is going
to a sole beneficiary (daughter), then the owner needs to create a
conduit trust as the IRA beneficiary with the daughter as the trust beneficiary. This makes the daughter an EDB (eligible designated beneficiary) under the Secure Act.
As such, RMDS would still use the old stretch IRA rules. The trust could limit annual distributions to the named beneficiary to be no more than
the RMD.
There are many investment firms that operate as IRA custodians and also provide "trusteed IRA" services.
What am I missing here?
On 8/2/21 2:26 PM, Alan wrote:
On 8/1/21 8:44 AM, Jane wrote:Minor correction. The daughter would be a designated beneficiary
I realize this is not a tax question but I am hoping someone will haveI'm confused by the answers to this query. If the owner wants to
a suggestion.
Most of my money is in either a 401(k) or IRA account. I have one
child and she is beneficiary to all of the accounts. She also has a
spending problem. I thought I could put my accounts into a trust but
apparently I can’t do that without paying taxes on all the money
first. I certainly am not going to do that.
Is there anything I can do to control her access to that money?
Needless to say I want her to be able to get money when she needs it
but I don’t want her taking a lot out frequently. She is disabled and
has no savings. I consider this money to be some thing to help her get
through her senior years. She doesn’t think that way.
I would appreciate any help. Thank you!
control (limit) how much money is distributed from an IRA that is going
to a sole beneficiary (daughter), then the owner needs to create a
conduit trust as the IRA beneficiary with the daughter as the trust
beneficiary. This makes the daughter an EDB (eligible designated
beneficiary) under the Secure Act.
As such, RMDS would still use the old stretch IRA rules. The trust could
limit annual distributions to the named beneficiary to be no more than
the RMD.
There are many investment firms that operate as IRA custodians and also
provide "trusteed IRA" services.
What am I missing here?
subject to the 10 year rule, not an eligible designated beeficary.
In a conduit trust with a designated beneficiary, the 10 year rule
merely requires that the retirement account be emptied by the end of the
10th year after the year of death. RMDs by year do not exist. The trust instructions could state how much is to be distributed in any given year
and that the remaining balance in year 10 is to be distributed.
E.g., it could say that 2.5% of the prior year-end balance is to be distributed every 3 months until the account is empty and if not empty
by year 10 that any remaining balance is to distributed in year 10.
On 8/3/2021 5:15 PM, Alan wrote:
On 8/2/21 2:26 PM, Alan wrote:
On 8/1/21 8:44 AM, Jane wrote:Minor correction. The daughter would be a designated beneficiary
I realize this is not a tax question but I am hoping someone will have >>>> a suggestion.I'm confused by the answers to this query. If the owner wants to
Most of my money is in either a 401(k) or IRA account. I have one
child and she is beneficiary to all of the accounts. She also has a
spending problem. I thought I could put my accounts into a trust but
apparently I can’t do that without paying taxes on all the money
first. I certainly am not going to do that.
Is there anything I can do to control her access to that money?
Needless to say I want her to be able to get money when she needs it
but I don’t want her taking a lot out frequently. She is disabled and >>>> has no savings. I consider this money to be some thing to help her get >>>> through her senior years. She doesn’t think that way.
I would appreciate any help. Thank you!
control (limit) how much money is distributed from an IRA that is going
to a sole beneficiary (daughter), then the owner needs to create a
conduit trust as the IRA beneficiary with the daughter as the trust
beneficiary. This makes the daughter an EDB (eligible designated
beneficiary) under the Secure Act.
As such, RMDS would still use the old stretch IRA rules. The trust could >>> limit annual distributions to the named beneficiary to be no more than
the RMD.
There are many investment firms that operate as IRA custodians and also
provide "trusteed IRA" services.
What am I missing here?
subject to the 10 year rule, not an eligible designated beeficary.
Now, if the taxpayer wanted to limit payouts to the daughter to LESS
than the RMD, how would that be done? Would the IRA have to be
terminated before taxpayer's death and all income taxes paid, with the balance funding a trust for the daughter with tighter distribution
rules? Or could the IRA be terminated at taxpayer's death to fund a
trust after payment of all income taxes?
On 8/4/21 12:16 PM, Alan wrote:The OP is trying to balance two somewhat incompatible goals,
In a conduit trust with a designated beneficiary, the 10 year rule
merely requires that the retirement account be emptied by the end of the 10th year after the year of death. RMDs by year do not exist. The trust instructions could state how much is to be distributed in any given year and that the remaining balance in year 10 is to be distributed.
E.g., it could say that 2.5% of the prior year-end balance is to be distributed every 3 months until the account is empty and if not emptyThis seems to mean that the funds are all available to the beneficiary
by year 10 that any remaining balance is to distributed in year 10.
by year 10.
Depending on Mom's age, I'd suggest slowly taking extra distributions
each year to balance the assets between the 10 year money, and funds
that can be there, growing for 10 years and slowly distributed after
that. The tax code's removal of the lifelong stretch IRA was not opposed
life I hoped it would be. Many were using IRAs as estate planning tools.
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