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You really don't need to get a private letter ruling (PLR). There are already rules in place, and you can use existing PLRs to cover your situation if the fact pattern is similar enough.
If the trust is written to follow strict IRS guidelines commonly known as
"see-through" or "conduit" trust rules, the trust can be beneficiary without any big problems. Although the income-tax rates that trusts pay are generally higher than income taxes paid by individuals, your heirs can avoid paying the high trust rate if the trustee can pass all the IRA distributions out to the individual trust beneficiaries. So you need to be sure that, if the trust is named as beneficiary, and the trustee has the latitude to do this, the IRA distributions won't get trapped inside the trust. The beneficiaries can roll them into their own IRAs. That is assuming that the trust was written by an attorney who knows about trusts and IRAs.
If the trust is the beneficiary and does NOT pass the IRA through to the beneficiaries, the trust would have to draw down the IRA in installments every year over the life expectancy of the oldest trust beneficiary.
If the estate does take the distributions from the IRA, it is income to the estate, but the estate gets a deduction for any distributions that it makes. So if the estate drew down $80,000 from the IRA, but turned around and distributed all of the funds to the beneficiaries of the estate, the estate would get a deduction equal to the amount distributed, in this case $80,000. The estate would have no taxable income, and each beneficiary would be taxed at his or her own tax rate. The problem with this is that the distributions might be significant enough to cause the heirs to pay a higher income tax rate on their personal returns. So careful planning to keep everyone happy is a must!
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