Bene IRA Titling when Trust is bene

Submitted by MIKE KRUCHTEN on Tue, 2023-05-02 23:34

I have a few questions tied to this case study.

Client age 55, single and has a Trust (John Smith Trust Dtd 4-1-17)as 100% prim bene. The Trust states a charity gets 25% and his 3 adult kids get 25% each. Adults are age 25,27 and 29. No conduit or accumulation trust language in document, pretty much a boiler plate Trust document. Trust doesn’t speak to IRA payouts nor any spend thrift provisions. Client passed away 4/15/23.

It’s my understanding if the charity is paid out before 9/30/24 the Trust would be considered a see through if all other qualified trust requirements are met??
Is this accurate?

As for Bene IRA title/ownership options, each adult child could be a Bene IRA owner or have Trust own the Be e IRA and customize a distribution over following 10 years regardless of Bene IRA ownership.

Benefit of Trust owning Bene IRA may be some creditor protection. Benefit of having each child own is a custom asset allocation for each based on risk tolerance. Any other benefits?

If the Trust does retain ownership of the Bene IRA what is the correct titling, seen so many variations and seems IRA Custodians will title as you request?

A lot to unpack but so many nuances with my case study. See so many articles about Secure Act language needing to be in Trust language when large IRA plans are involved but rarely see in documents in practice. Is their a site or service that provides this example language as a guide?



Submitted by Alan - IRA critic on Wed, 2023-05-03 21:18

  • It’s correct that if the charity is paid by 9/30/24 it is disregarded as a beneficiary, allowing the trust that meets other requirements to qualify for look through.
  • The trust provisions determine whether the trustee has the authority to terminate the trust or distribute the inherited IRA out of the trust. 
  • The trust might include retrictions to beneficiary distributions that keep funds in the trust instead of being distributed to a spendthrift or similar beneficiary. This is a frequent motivation to leave a retirement plan in trust even if the beneficiary does not need creditor protection.
  • Titling of an IRA inherited by a trust must include the name of the trust and the name of the decedent, in similar fashion to when an individual is the beneficiary. The IRS does not care about the listing order of these parties or about abbreviations a custodian might include. Some custodian platforms may require a certain style, but they are all acceptable to the IRS. 

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