A trust cannot own an IRA ?
Alan noted that an IRA cannot be owned by a trust . OK. Does that mean while the original owner is alive or it can never be owned by a trust.
Example: wife passed and I make trust for disabled child the bendficiary of my rollover IRA. As a trust cant own an IRA, after I die who is considered owner of the IRA? Does it make any difference to the answer if original owner has already started RMD’s
Thanks
Permalink Submitted by Alan - IRA critic on Tue, 2021-05-04 19:53
The IRA must be owned by an individual while living, but a trust can be named as the beneficiary. Upon death of the IRA owner, the trust becomes the beneficial owner of the inherited IRA, and controls the IRA in the same manner that an owner would. Of course, there are certain limitations, such as no 60 day rollovers and more restrictive RMD rules than actual owners have.
If you have a disabled child, you may want to name a special needs trust (SNT) as your IRA beneficiary. This will protect the child’s govt benefits and RMDs can be made over child’s LE, avoiding the 10 year rule. Further, upon the child’s death funds remaining in the IRA cannot be used to reimburse the govt for medicaid and other costs.