Ins and outs of look-through trusts
A look-through trust is one that can qualify as a designated beneficiary by meeting IRS requirements. This allows RMDS to be paid out using the age of the oldest trust beneficiary’s life expectancy— in other words, the trust beneficiary with the shortest life expectancy. In addition to the requirements below, all trust beneficiaries must be individuals or there could be no designated beneficiary on the IRA and the stretch option could be lost.
1. The trust is valid under state law or would be but for the fact that there is no corpus. 2. The trust is irrevocable or the trust contains language to the effect that it becomes
irrevocable upon the death of the employee or IRA owner.
3. The beneficiaries of the trust who are beneficiaries with respect to the trust’s
interest in the employee’s or IRA owner’s benefit are identifiable.
4. The required documentation is provided by the trustee to the plan administrator no
later than Oct. 31 of the year following the year of the IRA owner’s death.