Potential Issues for Trust being named contingent beneficiary?

Submitted by HFA123 on Fri, 2017-05-05 16:14

The client is 90 with two adult children. His spouse is the primary beneficiary but we are unsure if we should list the Trust as contingent beneficiary versus the two adult children outright 50/50. There is no need for asset protection or any concerns about protecting in the case of a divorce. Assuming the Trust can see-through and create two separate IRA’s for each adult child – are there any pros/cons for choosing one format over the other (naming the adult children outright or the trust).



Submitted by Bruce Steiner on Fri, 2017-05-05 19:32

  • What is “the Trust”?  
  • Our clients generally provide for their children in separate trusts for their benefit.  This keeps the children’s inheritances out of their estates for estate tax purposes, and protects their inheritances from their creditors and spouses,  However, if each child’s share of the IRA is too small to warrant administering trusts, or if keeping the children’s inheritances out of their estates for estate tax purposes isn’t a concern, and protection against creditors and spouses isn’t a concern, then the IRA owner can leave the IRA to his/her issue outright rather than in trust.
  • If you’re leaving the IRA to your children outright, there’s no purpose to running it through a trust.  It can only cause problems.

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