SECURE Act
I have a client who wants to designate a minor grandchild as the beneficiary of an IRA. We have discussed a number of options, including an UTMA, which under the law of our state may be extended to age 25. My client prefers the UTMA. Is there a way to designate the UTMA(or the UTMA custodian) as the beneficiary of the IRA if the UTMA is not established until the death of the IRA owner? Even if yes, what are your thoughts on establishing the UTMA now so we have a an “entity” in place with a designated initial custodian and a successor custodian? Thanks.
Permalink Submitted by Alan - IRA critic on Thu, 2021-03-04 19:36
I think most UTMA named IRA beneficiaries contemplate the actual UTMA account being established post death. The IRA beneficiary clause would name the “custodian for (beneficiary) under the Uniform Transfer to Minors Act” or the UTMA could be established and funded with other assets in the present. If there is concern over the unfettered access to the inherited IRA upon the age of majority, a trust could be used instead including a testamentary trust. Note that the Secure Act only allows for the minor child (not GC) to take LE distributions until the age of majority. A GC would immediately be subject to the 10 year rule unless disabled.