IRA Trusts and IRA Fiduciary Issues

AuthorSeymour Goldberg
ProfessionSenior partner in the law firm of Goldberg & Goldberg, P.C., Woodbury, New York
The potential that practitioners will be faced with prohibited transaction
excise taxes has recently increased for CPAs who act as trustees of IRA
trusts. CPAs who act in this capacity can be subject to excise tax liabilities
if the IRA trustee causes the IRA trust to directly or indirectly incur fees
that are not reasonable in the aggregate.
Because the U.S. Department of Labor (DOL) focuses on the
amount of fees incurred in rendering IRA advisory services to IRA ac-
count holders, the IRA trustee now faces increased scrutiny. The DOL
released the final fiduciary rule regarding IRA advisory services on
April 6, 2016, effective April 10, 2017. The DOL fiduciary rule focuses
primarily on the IRA adviser, whereas this section addresses the issues
facing the IRA trustee.
dol’s point of vieW
Although there has been a great deal of discussion involving IRS’s treat-
ment of IRA trusts, very little has been written about the DOL’s point
of view when an IRA trust is the beneficiary of an IRA. Since Dec. 31,
1978, the DOL has been delegated the authority to issue interpretations
regarding prohibited transactions under Sec. 4975 if IRAs are involved.
Sec. 4975 covers the rules for prohibited transactions.
A detailed discussion of Sec. 4975 as it relates to an IRA trust was
issued by the DOL in 2009 (see DOL Advisory Opinion 2009- 02A,
available at tinyurl .com / z4kwc7m). Practitioners need to be aware of
Advisory Opinion 2009- 02A so they do not fall into a trap that can trig-
ger tax problems when IRA transactions are at issue.
In the facts discussed in the advisory opinion, the IRA owner es-
tablished a revocable trust as the beneficiary of his IRA account. The
trust terms provide that it will become irrevocable upon the IRA owner’s
death. (That provision is required based on Regs. Sec. 1.401(a)(9)- 4,
Q&A- 5, when a trust is the beneficiary of an inherited IRA.) Seymour

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