Apr 1, 2006 12:00 PM

By Michael J. Jones, partner, Thompson Jones LLP, Monterey, Calif.

It's often necessary or simply desirable to terminate an estate or trust in favor of its beneficiaries. Problems arise when that estate or trust is the beneficiary of an individual retirement account (IRA) and termination should occur before all the IRA benefits must be withdrawn. Many fiduciaries would like to transfer that IRA to the trust's or estate's beneficiaries, thereby keeping the scheduled distributions and avoiding the tax that a lump-sum distribution would incur. But many financial institutions flatly refuse to allow such transfers. Some seem to think it is illegal. It most assuredly is not. The Internal Revenue Service should make clear that such transfers are legal. While waiting for such an unequivocal statement, however, smart financial institutions might consider grabbing new business by making it known that they will be accommodating.

This is how a fiduciary transfers all rights to future IRA distributions to a trust's or estate's beneficiaries and terminates fiduciary administration of the IRA. There are two steps:

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Topics of Interest

Estate Tax	Donor Advised Funds
GSTs	Family Offices
Private Foundations	Life Insurance
2010 Tax Act News	Industry Trends Surveys

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2011 Trust Glossary

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50 Years Ago This Month

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50 years ago, in May 1962, we featured articles such as: "Future of Canadian Trusteeship" by Arthur H. Mingay", "Training Trust Employees" by Ian M. Marr, "What is a Trust Officer?" by Eric J. Brown, and "Selling Services" by Donald I. Webb.

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