Hi there,
Recently my father-in-law passed away. The lawyer that created his living trust said, all accounts should go to the trust. After his passing, we learned that was not the best thing to do. As his IRAs had the trust as the beneficiary. My mother-in-law is the beneficiary. Unfortunately, she does not have too long, perhaps 2-3 years. I am now charged with trying to figure out how best to grow the funds and do the best thing from a tax perspective as my wife will inherit the trust.
I understand that the trust needs to be treated like a living entity, i.e. we need to file taxes. As the end of 20119 is not far, I am trying to do some tax planning. I read that the trust will be taxed on earnings. See here (
https://www.thebalance.com/2015-income-tax-brackets-estates-and-trusts-3504855). But, I am not sure how that can work, as the IRAs are inherited but inside of a trust. Will we need to pay tax on the gains within the mutual funds and again by my mother-in-law, she takes the required RMDs ? Or do they mean taxes due by the trust when monies are not in an inherited IRA but still in the trust? For example, interest earned when mutual funds are sold from the inherited IRA but monies are just sitting earning interest and not withdrawn via an RMD shortly after mutual funds are sold.
Any thoughts and guidance would be great.
Thanks in advance - sorry for the complex question.
