Why Designate a Trust as the Beneficiary In most cases, an IRA owner designates a trust as the beneficiary of the IRA to have control over the disposition of the assets after they die. The following are some reasons why an IRA owner might do this.
How do you name a beneficiary of a revocable trust?
To leave property to your living trust, name your trust as beneficiary for that property, using the trustee’s name and the name of the trust. For example: John Doe as trustee of the John Doe Living Trust, dated January 1, 20xx.
However, a trust also can be named as an IRA beneficiary, and in many instances, a trust is a better option than naming an individual. When a trust is named as the beneficiary of an IRA, the trust inherits the IRA when the IRA owner dies.
When does a trust become a beneficiary of an IRA?
The trust is irrevocable or will, by its terms, become irrevocable upon the death of the IRA owner. The beneficiaries of the trust are identifiable. A copy of the trust documents is provided to the IRA custodian by Oct. 31 of the year immediately following the year in which the IRA owner died.
Can a special needs child be a beneficiary of an IRA?
Receiving IRA benefits can jeopardize a special needs child-beneficiary’s ability to receive Social Security disability benefits. Establishing a trust is one way to prevent this outcome. Designating a trust as the beneficiary of an IRA could be a solution to the IRA owner’s financial planning needs.
Who are the beneficiaries of a 10 year IRA?
The new 10-year rule does not apply to the following beneficiaries (known as “eligible designated beneficiaries”): the IRA owner’s surviving spouse, the owner’s children while they are minors, certain individuals who are chronically ill or disabled, and any person who is not more than 10 years younger than the IRA owner.
Can a surviving spouse change the beneficiary of an IRA?
It is usually done to protect assets so that a surviving spouse can use them as needed but will not have the ability to change the beneficiary. The goal is to make sure assets are protected. If you name a trust as a beneficiary of your IRA, the trust must be drafted in a particular way for this strategy to be effective.
