Making Your Trust Your IRA Beneficiary

IRA TrustYour IRA (Individual Retirement Account) is limited in ways that a personal Revocable Living Trust wouldn’t be. A trust allows you to maintain a great deal of control over your assets and provide specific contingencies for the distributions, while an IRA is more limited in what personal solutions it offers.

One option is to name your trust as your IRA beneficiary. This will transfer the remainder of your IRA funds to your revocable living trust at death, subjecting these funds to whatever terms you created in your trust.

This tactic is particularly useful for remarried individuals when one or both spouses have children from a previous marriage. You can ensure that the trust’s income helps to support your surviving spouse while also stipulating precisely how your IRA will be distributed to your children. This avoids the problem of surviving spouses unfairly favoring their own children.

If you don’t yet have a trust, retain an attorney to assist you. Trusts are very complex legal documents and must be drafted by a professional to avoid ambiguities or legal inaccuracies that may invalidate your trust.

If you already have a trust and wish your IRA distributions to follow the same guidelines for beneficiaries as already outlined in the trust, you need only name the trust as your IRA beneficiary. This is the same as naming an individual, and should not require any additional information or work on your part. The exception to this is that the trust document must be submitted to the agency that holds your IRA within one year of your death.

Finally, if you want your IRA distributions to be governed by different rules than those already set up in your trust, you may draft an amendment to your trust document that outlines these new rules. Individuals frequently include provisions that explain how taxes on the IRA will be paid. Those taxes can either be paid with other trust assets, or a portion of the IRA may be kept in escrow for tax payments. Your lawyer can help figure out the best solution for your individual situation.