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Advisor Insights

Can a Trust Transfer an IRA to a Trust Beneficiary?

The answer is yes, but there are caveats.

Here’s a question I get at least once a week: “I’m dealing with a trust that holds an inherited IRA. Can the trustee transfer that IRA out to the individual beneficiary(ies) of the trust?” The unspoken part of the question is, “....without triggering an income tax?”

The simple answer is yes, in most cases a trustee can transfer an inherited IRA out of the trust to the trust beneficiary or beneficiaries without any negative tax consequences. Of course (surprise!) there are many qualifications, limitations, ifs, ands, and buts around that simple answer.