Once again, the IRS has confirmed that an IRA cannot be owned by someone’s revocable trust during his or her lifetime. Over the years, I have reviewed many revocable trust documents prepared by other attorneys, which include an attached Schedule A that states that the grantor has assigned or transferred his or her IRA to his or her revocable trust. According to the IRS’s recent ruling in PLR 201117042, this action would trigger immediate income taxation on the entire IRA.
This is a critical mistake that has potentially disastrous consequences. It’s crucial that anyone who may be subject to this situation have their estate documents carefully reviewed and updated if necessary.
– Adam Abramowitz, J.D.