IRA beneficiary designated in the name of a Trust

[Patti in Upstate NY]

First, I'll say I'm over this tax season and I'm hoping it's my last.  

I have clients whose parents died in 2020.  Part of what they left was an IRA a little over $200K which their financial advisor put into a "Beneficiary Designated IRA" in the name of the Trust.    He told me today that was to mitigate tax impact to the beneficiaries - my clients.  They need to take it within 10 years which has started.

There are two 1099Rs for 2024, one for each child/beneficiary.  The recipient on the form is the Trust.  But the Trust was closed in 2022.  

The financial advisor and I disagree on this.    He told me to just put it on their individual returns.  I think IRS will be looking for a Trust return even though it was final in 2022.

What say you?

Then, just for fun, I'll tell you someone dropped off their documents today.  $398K early distribution from IRA with NO tax withheld.  They bought Bitcoin with the proceeds.  

You can't fix stupid.  

 

 

[Sara EA]

The trust may have been closed on paper but not for tax purposes if it is still collecting income in its EIN.  If the trust is closed and the money is going to the beneficiaries directly in their SS numbers, no trust return required.

"$398K early distribution from IRA with NO tax withheld.  They bought Bitcoin with the proceeds.  You can't fix stupid."  To use an interrobang, they did WHAT?!  Or to borrow from Scarlett O'Hara, God's nightgown!  Hope they are ready to sell a lot of that bitcoin to cover the immense tax bill.  Reminds me of the client who took a lump sum for his wife's generous government pension that could have sustained them for life because he could do so much better investing it. (Said he, who already had $400k in long-term cap losses, being written off at $3k per year, evidence of his investing prowess.)

 

[DANRVAN]

1 hour ago, Sara EA said:

The trust may have been closed on paper but not for tax purposes if it is still collecting income in its EIN.  

Agree with that.

 

5 hours ago, Patti in Upstate NY said:

There are two 1099Rs for 2024, one for each child/beneficiary.  The recipient on the form is the Trust. 

If the amounts received match the amounts on the 1099 they need to report those amounts regardless.

[Patti in Upstate NY]

I received a text from the Bitcoin client early this morning "I'm a little terrified about how this will work out."  

Unprofessional, tired me replied "you should be."   It's done but I'm letting him sweat until tomorrow.