We are often asked about naming beneficiaries on an IRA. Should it be a person or a trust?

Bill does a lot of studying with Ed Slott–the IRA “guru” in this country.

It will probably be a living breathing person vs. a trust.  Individuals designated as beneficiaries of IRA can “stretch” out distributions over their lifetime.  For example, if you die and your children inherited your IRA, they could take out minimal distributions based on their life expectancy (and, essentially defer taxes for a long time). If a trust is the beneficiary, the IRA must be paid out within five years of your death.

However, there are special IRA trusts that can avoid this.  A special IRA trust must meet certain requirements so that an individual beneficiary (or beneficiaries) of the trust are treated as the designated beneficiaries of the IRA, thus preserving the “stretch”. These special IRA trusts are pretty common but do require additional legal work and expenses.

Recent Posts

When a loved one dies: First steps

When a loved one dies: First steps

Life throws curve balls, that much we know. The death of a loved one is an emotional and heart-wrenching time, and attending to all of the details that need to be addressed in the days, weeks and months that follow can feel completely overwhelming. Unfortunately, the...

read more