What you should know about naming an IRA beneficiary
Can your IRA be put directly into a trust? In short, no. Individual retirement accounts (IRAs) cannot be put directly into a trust. However, you can name a trust as the beneficiary of your IRA. As the beneficiary, the trust would inherit the IRA upon your passing, and would then have access to the funds, according to the terms of the trust.1
Can you control what happens to your IRA assets after your death? Yes. Whoever was named the beneficiary will inherit the IRA. But you also can name a trust as the IRA beneficiary. A trust, in other words, is your chosen heir. When you have a trust in place, you control not only to whom your assets will be disbursed, but also how those assets will be paid out.2
Using a trust involves a complex set of tax rules and regulations. Before moving forward with a trust, consider working with a professional who is familiar with the rules and regulations.
The trust can dictate the how, what, and when of income distribution. A trust will allow you to specify the amount your heir may receive. Additionally, you can include language that requires your heir to take monthly or annual distributions. You can even stipulate what the money should be spent on and how it should be spent.2
Why would I use a Trust instead of a Will? There are a couple of reasons. The biggest is that a will always passes through probate. That means a court oversees the administration of your will and ensures that the bequeathed assets are correctly distributed. This may lead to an expensive, slower process. Alternatively, a living trust can help certain assets avoid probate. This may save your estate and heirs both time and money. And for those who would like to keep their arrangements discreet, a trust can remain private whereas a will is a matter of public record.2
That sounds complicated. If decisions about your IRA are convoluted, it may be best to review your choices with a trusted financial professional who can explain the pros and cons of naming a beneficiary to your account.3
Provided by Patriot Asset Advisors
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Advisory services offered through: Patriot Asset Advisors, LLC an Ohio Registered Investment Adviser. Opinions expressed are that of the author and are not endorsed by Patriot Asset Advisors or its affiliates. All information herein has been prepared solely for informational purposes, and it is not an offer to buy or sell, or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular trading strategy. The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor.
1 -irs.gov/retirement-plans/plan-participant-employee/retirement-topics-beneficiary [10/17/19] 2-elderlawanswers.com/understanding-the-differences-between-a-will-and-a-trust-
7888#:~:targetText=Both%20are%20useful%20estate%20planning,soon%20as%20you%20create%20it. [9/19/19] 3 -bankrate.com/investing/what-is-a-trust/ [6/4/19]