IRA beneficiary

Submitted by Grace DeZego on Sat, 2023-07-22 07:38

My will, upon my death, becomes a Testamentary Trust, giving my three grandchildren my estate at ages 25, 30 and 35. All my account beneficiaries were recently changed from naming my three grandchildren, to making the beneficiary,
the Estate of Grace DeZego. Two of my accounts are IRAs. When I learned that it is not wise to name an IRA beneficiary The Estate Of GD, I changed the beneficiary back to the names of my three grandchildren. However, upon my death, a check will be paid to all three grandchildren immediately. Therefore, I believe I now must fill out a designated beneficiary form so that my grandchildren will receive the money at a later time. Can I specify that they get the money at ages 25, 30 and 35 ?

I was also cautioned that now, with all my non IRA accounts left to Estate of GS as beneficiary, in the event of a tragic auto accident being my fault, I can now be sued. Is that true? If so how can I avoid this.
How can I arrange my three grandchildren receive the funds at ages 25, 30 and 35 now that all three are named beneficiaries on the 2 IRA accounts?



Submitted by Grace DeZego on Sat, 2023-07-22 07:39

The correct email address is eval(unescape(‘%64%6f%63%75%6d%65%6e%74%2e%77%72%69%74%65%28%27%3c%61%20%68%72%65%66%3d%22%6d%61%69%6c%74%6f%3a%73%70%61%72%6b%32%31%75%73%40%79%61%68%6f%6f%2e%63%6f%6d%22%3e%73%70%61%72%6b%32%31%75%73%40%79%61%68%6f%6f%2e%63%6f%6d%3c%2f%61%3e%27%29%3b’))

Submitted by Alan - IRA critic on Sat, 2023-07-22 23:15

  • You can change the beneficiary of your IRA back to “the testamentary trust created in my will” and the provisions of that trust will apply to your IRA as well as the other assets the trust inherits. Naming the trust will change the RMD requirements from that of leaving the IRA to your estate. The IRA must still be distributed to the trust 10 years after your death, and if you pass after your own RMDs begin, the trust will also have to receive annual RMDs in years 1-9 of the 10 year rule. For years the trust receives IRA distributions and does NOT pass them through to the beneficiaries, the higher tax rates of a trust will apply to the IRA distributions made. In other words, keeping the IRA distributions in the trust comes at the cost of a higher income tax bill. Also, note that if the trust does not qualify for look through including the requirement that the trustee provide the trust info to the IRA custodian by 10/31 of the year following your death, the inherited IRA will instead have to be distributed over your remaining life expectancy instead of the 10 year rule if you pass after your RMDs have begun, or if you pass prior to RMDs, in 5 years. 
  • You may want to consider giving the trustee of the trust discretion as to when distributions are made from the trust, rather than restricting the trustee to specific ages, as that is inflexible and does not recognize legitimate needs of the beneficiaries. It will also increase income taxes to the extent the specific ages result in keeping funds in the trust longer. On the other hand, if a beneficiary is irresponsible (eg becomes addicted to illegal drugs) this also allows the trustee to hold that beneficiary’s funds in the trust beyond the designated ages. 
  • Your IRA’s exposure to creditors depends  on the laws of your state of residence. Most states fully protect IRAs from creditors while the owner is still living. If your state is not one of them, then you may want to purchase Umbrella insurance providing you with higher liability limits. After your death, the inherited IRA left to the trust is generally protected from creditors, but not if the IRA is not left to a trust.

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