Does transferring to a grantor trust eliminate deferral benefits for traditional and Roth IRAs?

Thanks for the overview! Quick question - does it matter if the trust is set up as a "see-through" trust vs. a regular trust? I've heard this makes a difference with how IRAs are taxed when they go to a trust. Also, would the charitable organizations getting some of the money change anything about the distribution requirements?

Yes, the distinction between a "see-through" trust and a regular trust is very important. A see-through trust (which can be either a conduit trust or an accumulation trust) allows the IRS to "look through" the trust to see the underlying human beneficiaries, potentially allowing for more favorable distribution schedules based on beneficiary life expectancies rather than the more aggressive 10-year rule that might otherwise apply. Regarding charitable organizations as partial beneficiaries, this can create additional complexity. While the charitable portion might ultimately not be subject to income tax when received by the charity, the mechanics of how and when those distributions occur can affect the overall tax treatment. The trust structure needs to be carefully designed to optimize the tax treatment for both individual and charitable beneficiaries.

Did they charge a lot for this service? I'm curious because my mom is in a similar situation with several retirement accounts and a trust, but we've been quoted some crazy high fees from local advisors. Also, does it actually give advice or just information?

How long did the analysis take? I'm worried we don't have much time left to make adjustments based on our family member's condition, and I'm wondering if this is something that could help us quickly or if it's more for long-term planning situations.

They offer several service levels depending on your needs. The initial analysis was surprisingly affordable compared to what I paid for in-person consultations, and the value was definitely there. Their system does provide both information and specific recommendations tailored to your situation. The analysis was completed within 48 hours of uploading all the documents. They actually have an expedited service option for time-sensitive situations like yours. In my case, they identified several immediate actions we could take to preserve more of the IRA benefits, even though we were also in a somewhat urgent timeline.

Wait, how does this even work? I thought the whole point was that you can't reach the IRS by phone these days. Is this some kind of premium line or something? Seems fishy that they could get you through when nobody else can.

I'm skeptical this actually works. I've tried everything to get through to the IRS about a similar trust issue and have been waiting on hold for literally hours only to get disconnected. How much did you pay for this "miracle" service?

It uses a technology that navigates the IRS phone system and holds your place in line, then calls you when an agent is about to answer. It's completely legitimate - they don't have a special line or anything, they just have a way to deal with the waiting so you don't have to sit on hold. They don't claim to guarantee an answer to your specific question, only that you'll get connected to an IRS representative. In my case, I was prepared with exactly what I needed to ask about trust distribution rules for IRAs, so when I got connected, I could make the most of the call.

Thank you for mentioning the SECURE Act changes. Does this still apply if the IRA is first transferred to a trust, and then the trust distributes to these different types of beneficiaries? Or does moving it to a trust first eliminate these exceptions? One of the beneficiaries is my aunt's disabled sibling, so I'm wondering if there might be special provisions that could help in that case.

When an IRA is left to a trust, the ability to use these exceptions depends on how the trust is structured. If the trust qualifies as a "see-through" trust and the disabled sibling is an identifiable beneficiary, then yes, that portion of the IRA might qualify for the exception allowing for distributions over that beneficiary's life expectancy rather than the 10-year rule. This would require specific language in the trust that clearly identifies the disabled beneficiary's portion and likely a separate share for that beneficiary. The trust would also need to meet all the requirements to be considered a see-through trust under IRS regulations. This is definitely a situation where specialized estate planning advice is crucial, as properly structuring the trust could result in significantly better tax treatment for that portion of the IRA.

With Roth IRAs going to a trust, the key benefit that can be preserved is the tax-free nature of qualified distributions. Unlike traditional IRAs where distributions are taxable, qualified Roth distributions remain tax-free even when distributed to a trust or through a trust to beneficiaries. The main thing lost is the ability to stretch distributions over a long period - the SECURE Act's 10-year rule typically applies unless beneficiaries qualify for exceptions. But within that 10-year window, growth remains tax-free, which is still valuable. Generally, it's better to keep the Roth intact rather than distributing before death, as this maintains the tax-free growth for as long as possible within allowable limits.