IBA Compliance Connection

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We have an IRA customer who passed away. The named IRA beneficiary was a trust, and the trustee has requested a lump-sum distribution of all IRA funds. Do we make the check out to the IRA beneficiary, which is the trust, or to the trust’s beneficiaries?

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You should make the check payable to the trust, which is the IRA's beneficiary (an IRA beneficiary may be any person or entity, including a trust).  Also, when making the distribution to the trust, keep in mind that the IRS rules require you to use the name and tax identification number of the trust, not of the deceased customer.

For resources related to our guidance, please see:

  • IRS Publication 590-B — Distributions from Individual Retirement Arrangements (IRAs) (2016) (“If you inherit a traditional IRA, you are called a beneficiary. A beneficiary can be any person or entity the owner chooses to receive the benefits of the IRA after he or she dies.”)
  • IRS, Instructions for Forms 1099-R and 5498 (“If you make a distribution to a beneficiary, trust, or estate, prepare Form 1099-R using the name and TIN of the beneficiary, trust, or estate, not that of the decedent.”)