Should I Designate a Trust as My IRA Beneficiary?

Trusts may be sufficient beneficiaries under the proper circumstances.

Saving for retirement is a priority for you.

You have an IRA.

When you retire, you can use these IRA funds for your golden years.

What happens if something terrible happens?

What if you die before retirement or before you can withdraw all of the funds?

According to a recent KTVA.com article titled “How to Name a Trust as Beneficiary of an IRA,” a viable option may be designating a trust as your beneficiary?

How would this be helpful?

First, it allows you to control distribution of the assets through written instructions.

This is important, especially if you have a minor child or a child with special needs.

Doing do will help protect the inheritance from creditors and protect federal disability assistance.

Despite these benefits, designating a trust as beneficiary may not be ideal in all circumstances.

If you are leaving the IRA to a spouse, it would be better to do so directly.

There is a high probability your spouse could roll over your IRA into their own IRA tax-free.

Designating a trust will require careful planning.

For example, the trust needs to be either irrevocable in your lifetime or when you die.

The beneficiaries of the trust must be identifiable, individual people.

Finally, your trustee is required to provide trust and beneficiary documentation to the IRA custodian by October 31^st in the year after your pass away.

Before you settle on making a trust your IRA beneficiary, consider the whether it is a good fit.

Setting up, structuring, and maintaining a trust can be complicated.

Designating a beneficiary directly is certainly simpler.

Consider who you would ultimately like to receive the money and how you would like them to receive it.

Some relatives, such as a spouse, would be better served as a direct beneficiary.

With so many factors, be sure to work with an experienced estate planning attorney.

He or she can help you determine what is best for your situation.

If you choose a trust, you will certainly need professional help.

Reference: KTVA.com (July 15, 2019) “How to Name a Trust as Beneficiary of an IRA”