When a trust is beneficiary, can the beneficiaries of the trust use the life expectancy payout method?
Rev. 12/04/09; E-mail Alert 2009-19

The Final and Temporary Required Minimum Distribution Regulations of April 17, 2002, stipulate that a trust may not be a “designated beneficiary” as the regulations reserve the term “designated beneficiary” to actual persons. Nonetheless, a trust may be named as a beneficiary of a qualified plan, 403(b) or IRA participant. However, since it is not a person, a trust may generally not use the life expectancy method of payout, but individuals who are beneficiaries of the trust are able to be treated as designated beneficiaries, and thus use the life expectancy payout method, if the trust meets all of the following four requirements:

• It is valid under state law or would be valid but for the fact that there is no trust corpus
• It is irrevocable, or would become irrevocable no later than the participant's death
• The beneficiaries are identifiable under the trust instrument
• A copy of the trust instrument or a certified list of beneficiaries is provided to the plan administrator

Bill Grossman, ERPA, QPA