. In contrast, a purely discretionary trust (sometimes called an "accumulation trust
") will have greater asset protection, since the trustee is not compelled by the terms of the trust instrument to pass out to the beneficiary the minimum required distribution from the inherited IRA.
If the retirement benefits are left to an accumulation trust
(one in which the trustee is not required to distribute to the surviving spouse all distributions received from the plan and instead may accumulate the distributions within the trust) for the benefit of the spouse, the RMDs must begin by December 31 of the year following the year of the participant's death.
"We anticipated this problem, so if we haven't heard from savers, we default them into an accumulation trust
, which is what they've always been paying into.
Bongard Irrevocable Stock Accumulation Trust
(ISA Trust), an irrevocable trust he created and funded in 1986 for his family's benefit.
Under such circumstances, the trust is an accumulation trust
for federal income tax purposes and is not to be treated as one requiring current distributions of income.
It covers gifts and bequests, the decedentAEs income tax liability for the taxable year ending at death, the treatment of oincome in respect of a decedento in the hands of an estate or other successor, the classification and duration of an estate or trust as a separate taxable entity, taxable income of estates and trusts, distributable net income, distributions, grantor trusts, trusts for charitable purposes, foreign trusts, accumulation trusts
, and trusts governed by specific statutory provisions.
Patricia Mock, director of private client services at Deloitte, said: "Historically, transfers into interest in possession trusts and accumulation trusts
have been potentially exempt for inheritance tax and are exempt if the donor survives for seven years after the gift.