IRA Trusts

Submitted by Richard Ernst on Tue, 2016-06-07 00:03

I have a client, age 62, with over 1.5 million in IRA assets. His two children, ages 22 & 16, are his current beneficiaries. He has been reading up on IRA Trusts and is very interested in establishing a trust for future creditor protection for his kids. His question to my office was: “Within the IRA Trust, can “Sub-Trusts” be established to take advantage of both Life Expectancies and not having benefits being based only on the oldest beneficiaries LE?” As always, thank you for your assistance.



Submitted by Alan - IRA critic on Wed, 2016-06-08 16:24

IRS PLRs on this subject have evolved through the years. There might be something newer, but about 10 years ago PLRs resulted in the sub trust beneficiaries being separated by each sub trust only IF the sub trusts were specifically included in the IRA beneficiary clause. If only the master trust was named, then all the sub trusts were to be treated as one combined trust for RMD purposes.

Submitted by Bruce Steiner on Wed, 2016-06-08 20:29

  • It would be easier to have the IRA payable one-half to each child’s trust.  However, each child will probably be a contingent beneficiary of the other child’s trust (in other words, if a child dies without leaving any issue, and without exercising his/her power of appointment (or if the child doesn’t have a power of appointment), the balance of the deceased child’s trust will probably be added to the other child’s trust (if the other child is living).  So the stretch for the younger child’s trust will probably be limited to the older child’s life expectancy.
  • For more on this, see my article on this subject:  http://www.elderlawanswers.com/Documents/Trusts%20as%20Beneficiaries%20of%20Retirement%20Benefits.pdf. 

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