IRA Beneficiaries at Banks
Most banks and all banks I deal with will not allow IRA beneficiaries with per Stirpes added . IRS seems to allow Trusts as beneficiaries with designated beneficiaries named in the Trust. I have been advised by 2 attorney’s that I should not put my IRA’s in Trust because there could be major tax problems. I do not see this problem per IRS rules. My Trust is revocable and when I pass it will be irrevocable with beneficiaries named in the trust. Why I want them in Trust or per stirpes if one benef. dies and I am incapacitated at the time all IRA’s will go 100% to the other beneficiary. I have but 2 benef.’s. Since both beneficiaries have children , my desire is for the children (my grandchildren) to be beneficiaries of their parents inheretence.I could place IRA’s in investment co. but would have to pay large penaties for withdrawal. Any answers. Thanks.
Permalink Submitted by Alan - IRA critic on Thu, 2015-02-05 03:54
Most brokerage firms will allow per stirpes designations, although Vanguard resisted them in the past. As for trusts as IRA beneficiaries, there is no particular tax problem if the trust is drafted correctly and the trustee meets the requirements for notification such that the trust is qualified for look through treatment. Trust also provide creditor protection for beneficiaries including spouses. Some possible solutions include reconsidering the trust as beneficiary, transferring the IRA to a custodian that will accept per stirpes, or drafting a POA that will allow the attorney in fact to make beneficiary changes if you are incapacited. You may also find that if you move the IRA, you can recover the exit fees from this bank by changing the investments into low cost investments including no front or back end loads and low operating expenses. Custodians with large penalties often include them because they know you can do better elsewhere and try to lock you in.
Permalink Submitted by Bruce Steiner on Fri, 2015-02-06 03:27
For more on trusts as beneficiaries of retirement benefits, see my article on this subject in the March 2004 issue of BNA Tax Management’s Estates, Gifts & Trusts Journal: http://www.kkwc.com/docs/AR20041209132954.pdf.