Transferring inherited IRA to grantor trust during life.

• Author: Winton, Lisa A.
• Position: News Notes

IRS Letler Ruling 200620025 addressed the transfer of an IRA inherited by a disabled beneficiary to a "special needs" grantor trust to be established for the beneficiary's benefit, with state court approval to preserve the beneficiary's Medicaid benefits. The Service held that the transfer to the trust will not be treated as a sale or disposition of the IRA, nor give rise to income recognition under the Code's rules for income in respect of a decedent. The IRS also ruled that the required minimum distributions paid to the trust from the IRA could be calculated using the disabled beneficiary's age.

Although...