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Spousal 'Conduit' Trust Attained

The applicable divisor used to compute RMDs would be recalculated each year.

In Private Letter Ruling 201902023 (released Jan. 11, 2019), a trust named as a decedent’s individual retirement account beneficiary was required each year to pay the surviving spouse the IRA’s income or, if greater, the year’s required minimum distribution (RMD).

After the IRA owner died, documentation was timely provided to the IRA custodian, meeting a requirement to enable the trust to make RMDs over the life expectancy of the spouse.

The IRS confirmed that the spouse would be treated as the IRA’s beneficiary for purposes of RMDs (making the trust a so-called look-through or conduit trust) and that the annual divisor used to compute distributions would be recalculated each year (Treasury Regulations section 1.401(a)(9), Question and Answer-5(c)(2)).

The most interesting takeaway from this ruling is that the applicable divisor of a conduit trust with respect to a surviving spouse won’t be reduced by one each year, as would be the case if recalculation hadn’t been allowable.

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