Any benefits of naming a trust the IRA beneficiary?

Submitted by Daniel Margolien on Tue, 2018-09-04 16:53

Are there any benefits to naming a trust as the IRA beneficiary and then doling the RMDs from there?
Thank you!



Submitted by Alan - IRA critic on Tue, 2018-09-04 17:46

There are trade offs in naming a trust, and if you do you need to make sure the trust is qualified for look through treatment. Benefits include creditor protection for the beneficiary, and control of when the beneficiary receives funds from the trust, and how much is passed to the beneficiary each year. There are different kinds of trusts for different situations, such as a special needs trust for a disabled beneficiary receiving govt benefits. 

Submitted by Daniel Margolien on Tue, 2018-09-04 18:37

Can the stretch be maintained?

Submitted by Alan - IRA critic on Wed, 2018-09-05 00:00

If the trust is qualified for look through treatment, the stretch is determined by the oldest beneficiary of the trust including remainder beneficiaries.  

Submitted by Ben Meyer on Wed, 2018-09-05 15:37

How do you distinguish a remainder beneficiary from a “mere potential successor” beneficiary under T.R. 1.401(a)(9)-5, A-7(c)(1)?  Anyone who is the latter can be disregarded in determining the stretch.  There seems to be a lack of clarity in making the distinction.    

Submitted by Bruce Steiner on Sun, 2018-09-09 01:04

  • Assets passing in trust won’t be included in the beneficiary’s estate for estate tax purposes, and will be better protected against the beneficiary’s creditors and spouses, and Medicaid.
  • The same applies to IRA benefits as to other assets.
  • The trustees may distribute more or less than the required distributions each year.  In order to distribute more than the required distributions in a given year, they would have to withdraw more than the required distribution from the IRA that year.
  • Bruce Steiner

Submitted by Alan - IRA critic on Sun, 2018-09-09 01:48

While there are most likely other examples, the example in the stated IRS Reg suggests that if the current beneficiary has less than full access to the IRA balance, the other beneficiaries would not be considered “mere successor beneficiaries”.

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