RLT vs. IRA Trust as Beneficiary
I have a client (age 62) who is married with one daughter. He has 1,500,000.00 IRA assets. He is starting to evaluate his estate holdings and was told by his legal team to name their Revocable Living Trust (RLT) as “Contingent Beneficiary” to the IRA.
He does have concerns as it pertains to the daughters life style and would like to put stipulations into the trust as it pertains to RMD’s and the access the said IRA.
With Inherited IRA’s no longer a “Protected Asset”, it makes cense to name a trust as a beneficiary. My question is, what are the underlying differences between naming the RLT vs. establishing an IRA Trust. Are they taxed internally the same? Can you take advantage of the RMD’s more efficiently using one trust over the other?
Permalink Submitted by Bruce Steiner on Thu, 2014-11-13 04:18
Permalink Submitted by mk foss on Sat, 2014-11-15 01:05
If he names the Revocable Living Trust as the beneficiary, he should amend the trust first and add a section that outlines what happens “if this trust is the beneficiary of an IRA” to make it easier for the trustee and the custodian to administer. It is beneficial to name children directly as IRA beneficiaries but whenever there is an issue (1) with wanting to prevent immediate liquidation of the IRA, (2) wanting some creditor protection for the beneficiary or (3)the likelihood of divorce – then a trust may be appropriate. A good trust agreement will define “income” for trust distribution purposes and give direction to the trustee regarding the grantor’s wishes.