Life and Death Planning for Retirement Benefits

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Chapter 6: Leaving Retirement Benefits in Trust 285
not change either the identity of the individuals who will receive the IRA Y proceeds or
the identity of the designated beneficiary of IRA Y.... Furthermore, the Trust X termination
language which results in distributions from IRA Y being made directly to Taxpayers C
and D instead of initially to Trust X and then to Taxpayers C and D was language in Trust
X approved by [the participant] during his lifetime which reflects [the participant’s] intent
to pay his children directly instead of through Trust X.”
Other rulings approving the transfer of a retirement plan from a trust to the trust
beneficiaries (without requiring termination of the plan account or otherwise triggering immediate
income tax) are: regarding IRAs, PLRs 2000-13041, 2001-09051; 2003-29048 (IRA payable to a
trust divided into four “sub-IRAs,” each to be held by one of the individual trust beneficiaries);
2004-33019; 2004-49040–2004-49042; 2005-26010; 2006-15032; 2006-18023 (involving a
nonqualified annuity); 2007-40018; 2007-50019; 2008-03002 (annuity contract); 2008-26028; and
2009-35045. Regarding transfer of an inherited IRA to charitable residuary beneficiaries, see
2006-52028 (discussed at ¶ 7.4.05 )
For rulings permitting Beneficiary IRAs to be opened directly in the name of the individual
trust beneficiaries (rather than first in the name of the trust), where the IRA was payable to a trust
that was to terminate immediately upon the participant’s death and be distributed outright to the
individual beneficiaries, see PLRs 2005-38030, -38031, -38033, and -38034.
PLRs 2002-34019 and 2008-50058 permitted retirement benefits to be transferred, intact,
out of an estate to the estate beneficiaries. In PLR 2010-13033, an IRA was payable to an estate;
the IRS permitted transfer of the IRA from the estate to the “pourover” trust that was beneficiary
of the estate, and thence to the trust’s beneficiaries. For more PLRs, se B).
Unfortunately, PLRs cannot be cited as authority. The PLRs discussed above cite
Rev. Rul. 78-406, 1978-2 C.B. 157, which established the rule that an IRA-to-IRA transfer is not
a “distribution” and accordingly does not have to meet the requirements of a “rollover” (see
. However, Rev. Rul. 78-406 did not deal with transferring an inherited IRA, let alone
transferring it from a terminating trust (or estate) to the trust (or estate) beneficiaries. It referred to
the transfer from one IRA to another IRA in the same name (the name of the participant), which
is not quite the same as a transfer from an IRA in the name of a trust as beneficiary to an IRA in
the name of an individual or charity as successor beneficiary.
D. IRA providers and plan administrators. Some IRA providers (see
readily permit these transfers, upon
receipt of proper instructions from the fiduciary of the trust or estate, plus (in some cases)
an opinion of counsel. However, some IRA providers do not allow these transfers, either
because the IRA provider has concluded they are not legally permissible or because the
IRA provider’s computer systems cannot accommodate them.
A fiduciary faced with an IRA provider’s refusal to allow transfer of an inherited IRA to
the trust or estate beneficiaries has four choices: #1. Cash out the plan and give up further deferral.
#2. Keep the trust or estate open until the end of the ADP, to preserve continued deferral of
distributions, but at the cost of ongoing administration expenses. #3. Get a ruling from the IRS, if
that will convince the IRA provider to allow the transfer. #4. Move the account (still in the name
of the estate or trust), by means of an IRA-to-IRA transfer E), to a more