bank refuses to disclaim IRA from family trust

[nachumk]

What is the name of your state (only U.S. law)? California

Hi,

My girlfriend's mom passed away a couple of years ago, and her mom left some retirement accounts in a family trust. Her mom and her dad were both named as trustees. The terms of the trust say that upon the passing of one of them, the other one becomes the sole trustee. At the time that her dad passes away, the trust will pass on to her and her brother.

Her dad would like to take one retirement account and disclaim it from the trust so that it passes directly on to her and her brother. This is to save the IRA from being taxed multiple times.

They had a lawyer write up a letter to this end, and they brought this letter to the credit union where the IRA is held. The credit union has been very unhelpful in the process. They are basically refusing to accept the disclaimer by not cooperating. They want the IRA to get dispersed into a trust account.

The trust lawyer has asked to get the credit union's lawyer's contact info to talk directly with their lawyer. The credit union won't provide this information either.

What should they do?

Thank you,
Nachum

 

[LdiJ]

What is the name of your state (only U.S. law)? California

Hi,

My girlfriend's mom passed away a couple of years ago, and her mom left some retirement accounts in a family trust. Her mom and her dad were both named as trustees. The terms of the trust say that upon the passing of one of them, the other one becomes the sole trustee. At the time that her dad passes away, the trust will pass on to her and her brother.

Her dad would like to take one retirement account and disclaim it from the trust so that it passes directly on to her and her brother. This is to save the IRA from being taxed multiple times.

They had a lawyer write up a letter to this end, and they brought this letter to the credit union where the IRA is held. The credit union has been very unhelpful in the process. They are basically refusing to accept the disclaimer by not cooperating. They want the IRA to get dispersed into a trust account.

The trust lawyer has asked to get the credit union's lawyer's contact info to talk directly with their lawyer. The credit union won't provide this information either.

What should they do?

Thank you,
Nachum

Why do they think that the IRA will be taxed multiple times if it is not removed from the trust?

 

[curb1]

Messy situation. The trust is the beneficiary of the IRA (normally a very poor situation). The credit union is doing what it should by placing the assets with the beneficiary.

 

[tranquility]

An attorney can't figure out how to get a bank to talk with him? Um, if the attorney is sure of the situation, I think they call it a lawsuit. My guess is that the attorney is unsure.

 

[nachumk]

Why do they think that the IRA will be taxed multiple times if it is not removed from the trust?

They were advised by the CPA in the their lawyer's office that they would save taxes this way. Is this correct?

My girlfriend isn't sure about the reasoning, she believes it's either b/c the trust will have to pay taxes on the IRA when it gets transferred to the trust, or perhaps her dad would have to pay taxes on the IRA. And then when her dad passes away, the IRA would be taxed again when it gets disbursed to her and her brother.

The IRA hasn't yet been put in the trust, and instead their dad wants the trust to disclaim the IRA and have the IRA passed directly on to her and her brother.

 

[nachumk]

What can be done to resolve this? Her dad, who is the trustee of the trust, disclaims this IRA for the trust. Shouldn't the bank be obliged to accept this?

 

[tranquility]

Why does your attorney believe the trustee has the power to disclaim? I suspect some of the tax aspect of the IRA has to do with the type. If you have an attorney, why are you posting here?

 

[nachumk]

Why wouldn't the trust be able to be disclaimed? And the reason we don't have the attorney working on this is because that gets expensive. I was hoping to get some information online that might be able to help. The bank didn't say that we couldn't disclaim the trust, it's just that they are being completely uncooperative. Can someone explain why that might be?

Thanks,
Nachum

 

[tranquility]

Why wouldn't the trust be able to be disclaimed?

Because it's not the trustee's money.

And the reason we don't have the attorney working on this is because that gets expensive.

That's what I thought. You tried to imply your attorney didn't understand, but it is you who does not.

I was hoping to get some information online that might be able to help. The bank didn't say that we couldn't disclaim the trust, it's just that they are being completely uncooperative. Can someone explain why that might be?

Because the trustee probably doesn't have the power to do so.

 

[nachumk]

I realize that I misspoke in that last reply. The trustee, her dad, wants to disclaim the IRA on behalf of the trust. He doesn't want to disclaim the trust itself.

Can you explain why he wouldn't be able to do this?

I came to this forum for help as I don't understand this stuff. And I really appreciate whatever help you can give.

Thanks,
Nachum

 

[tranquility]

Because, as the trustee, he does not usually have the power to give away the beneficiaries' money.

It is not his money, it is the trust's to be managed in the way the grantor intended.

Even if it were possible to disclaim to a person (You can't really, you just up your rights. That it then goes where you want is a coincidence.), why could the person who is trusted to do the grantor's wishes under the terms of the trust be able to ignore them?

Say the trust said all money is to be used to provide farkeling lessons for Joe. The trustee disclaims in a way the money ends up in Joe's hands. Now Joe can use the money any way he pleases and would not have to use it solely for farkeling lessons.

 

[anteater]

Let's say, for the moment, that the credit union would entertain a disclaimer from the trustee...

Does the IRA agreement have any named contingent beneficiaries?