Trust as IRA Beneficiary and Stretch

Submitted by W Dobroski on Mon, 2016-09-26 15:49

Using a Trust as IRA Beneficiary for benefit of grandchildren means using the oldest Beneficiary’s age (currently toddlers) to determine the “stretch” expectancy calculation.
That is ideal in this case versus using their parents as first or even contingent Beneficiaries (much shorter stretch).

However, there seems to be no obvious way for the Roth IRA asset to go to the parents’ benefit should they lose their children, i.e. the named primary beneficiaries of that Trust (without of course
naming the parents as contingent beneficiaries of the Trust, which would lose the greater stretch).

A Discretionary Trust is preferred tho a Conduit may be the only alternative?

Any suggestions?

Can a contingent Beneficiary be named for the IRA itself (vs a contingent Beneficiary for the grandchildren’s Roth Trust),
e.g. even a trust for the parents as a contingent Beneficiary for the IRA, and yet not otherwise lose the much longer stretch, if living, for the grandchildren (vs if it were a contingent for the grandchildren’s Roth Trust)?



Submitted by Bruce Steiner on Tue, 2016-09-27 03:50

  • If the IRA owner names the grandchildren, or trusts for the grandchildren, as the beneficiaries, he/she can name the children, or trusts for the children, as the contingent beneficiaries if the grandchildren predecease him/her.  
  • However, if the children are subsequent beneficiaries of the grandchildren’s trusts, and the grandchildren survive the IRA owner, since it’s possible that the grandchildren could subsequently predecease the children, then the stretch is limited to the oldest child’s life expectancy.
  • The stretch is limited based on the life expectancy of the oldest person who might receive benefits, determined as of the IRA owner’s death.
  • If there are enough grandchildren so that the chances that they’ll all die without any issue (descendants) is remote, then they might be willing to take that chance, and exclude the children as subsequent beneficiaries of the grandchildren’s trusts, taking the chance that if the grandchildren survive them but subsequently die without any issue, the balance of the trust will go to other persons (such as grandnieces and grandnephews).
  • However, if there’s only one grandchild, they might not be willing to take that chance, and they might want to have the children as possible beneficiaries of the grandchild’s trust, even if that means limiting the stretch to the oldest child’s life expectancy.

Submitted by W Dobroski on Tue, 2016-09-27 16:16

Thanks Mr Steiner, That is a really helpful and thorough outline.And just to be certain I fully understand one option correctly:If the IRA lists Grandchildren Trust as the IRA’s Beneficiary, and Children’s Trust as the IRA’s Contingent Beneficiary, then if the Grandchildren do not predecease the Children, and in fact also survive the IRA owner,the life expectancy would at IRA owner’s death be basedupon the oldest surviving Grandchild’s age.(of course so long as that is the oldest potential Beneficiaryof the grandchildren’s trust)Thanks once again for the help

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