Naming Trust As Beneficiary Of IRA

Can A Trust Be A Beneficiary Of An IRA In Texas

Trust As IRA Beneficiary In TX

It is not a good idea to name a trust as a beneficiary of your IRA because the IRA will lose the benefit of tax-deferred growth. This is because the IRA will have to be distributed faster and then taxed in a different way compared to other situations. The same applies if a business entity or estate is a beneficiary. Get in touch with a trusted experienced estate planning law firm to get additional information.

Naming A Look Through Trust As IRA Beneficiary

Living Trust As Beneficiary Of IRA

A look-through or see-through trust is a trust that you can transfer your retirement assets to from your Individual retirement accounts (IRAs). Making a look-through trust a beneficiary of your IRA does not lead to the IRA being distributed faster while being taxed. But this benefit is only available if the IRA is distributed within 10 years.

Can You Name Your Spouse’s Revocable Living Trust As IRA Beneficiary

How To Name A Trust As A Beneficiary

Naming Trust As Beneficiary Of IRANaming your spouse’s revocable living trust as a beneficiary does not come with a penalty.  There is a well-known ruling involving a married couple that made this seem like a good idea. The husband was taking required minimum distributions from an IRA he owned and named a trust as the sole beneficiary of his IRA when he died.

The revocable living trust benefiting from the IRA was set by the wife for probation purposes. She was both the only beneficiary and the trustee of that trust. Since it was a revocable trust, the wife could change the terms of the trust to benefit her.  Her main goal was to use the spousal option for an inherited IRA to roll over her husband’s IRA into her IRA.

That would give her more say in managing the IRA. For example, she could set the time duration within which she could begin RMDs and choose beneficiaries for the IRA. She negotiated with the IRS to allow her to roll over her husband’s IRA tax-free into an IRA in her name, and the IRS allowed her to do it.

But this was only possible because she was the sole beneficiary of the trust and was the surviving spouse of the owner of the IRA. She was the only one going to benefit from the IRA.  This is the reason why she could roll over any distribution from the inherited IRA into her own IRA without including it into her income.

The only condition was that she had to roll over the inherited IRA within 60 days of the distribution.

Should You Set Up A Trust?

Inheriting An IRA From A Trust In TX

People with a substantial amount of assets, and only want their assets distributed according to their instructions should think of setting up a trust according to experts. Other reasons why you may want to create a trust include:

  • Keeps you in control of your estate when you are alive and after death
  • Assets held in a trust are not probated, which keeps your business out of the public eye
  • Assets held in a trust start benefiting your heirs soon after you die instead of them waiting for months for a probate process to be completed
  • A trust allows you to distribute assets more thoughtfully
  • Trusts protect your assets from lawsuits, creditor claims, and more