What Are My Options For Naming a Trust as IRA Beneficiary for a Minor Grandchild?

By Beverly DeVeny and Sarah Brenner
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This week’s Slott Report Mailbag looks at the logistics of naming a trust as IRA beneficiary for minor children and strikes down a common mistake made by employer plans when dealing with employer plan distributions rolled over to an IRA. As always, we recommend that you work with a competent, educated financial advisor to keep your retirement nest egg safe and secure. You can find one in your area here.


I have named my 11 grandchildren as my traditional IRA beneficiaries. Two of them are ages 11 and 7. Both of them might still be minors when my wife and I are deceased. Will one of their parents need to be named as a custodian for them? How should that account be titled?  How will their required RMDs (required minimum distributions) be processed if their inheritance is in a custodial account? Will they not be able to claim their inheritance until they are 18? Will they not need to make a RMD until they are 18?

Would it be better if I used their parents’ name on the beneficiary form instead of theirs and told my son and his wife that their names are only used to prevent the underage problem, but the inheritance is for their two children?  If I did that though, the parents’ ages would be used for computing the two young grandchildren’s RMDs, losing most of their value in the intended stretch process.

I do not want to create a trust for both of them while not having a trust for the other nine, over 18 years of age. Please help me understand this issue since I am presently printing instructions for each of the grandchildren on how to properly manage their non-spousal IRA inheritance. My five children will inherit everything except my IRA. I wanted to give all eleven a head start; hopefully they would use the stretch option. Thank you in advance for any clarification you can give me for this predicament. 


You will need to know what your IRA custodian requires when a minor is the beneficiary of retirement funds. Usually, a parent would be considered the legal guardian of the minor and would handle the minor’s financial affairs. The other option you have is, as you noted, a trust. You could have the trust end at age 18 or 21 for the minors; it does not have to go on any longer than that, if that is what you want. You could also use an UGMA or UTMA (uniform gift to minors) account. Those end at the child’s age of majority and are useful when the intent is for the minor to have full access to the funds at their age of majority.

RMDs must start in the year after your death. They would be made to either the guardian or the trust.


Dear IRA Help Mailbag:

My husband died this March, one month after his 70th birthday, but before his required beginning date.

I want to rollover all of his retirement plans, (403(b)s and IRAs), to my own IRA, but one of the custodians says that they must pay out to me his 2015 RMD first as an RMD, so I can’t even put that distribution back into my IRA. It’s bad enough that they are paying me out a distribution I don’t want, but worse in saying that I cannot redeposit it in the usually allowed 60 days.

IRS Publication 590-B says on page 8 that he does not have to take an RMD distribution since he never reached his Required Beginning Date (RBD) of age 70 ½. I have not had this problem with his IRA or the other 403(B) custodian.

What are my options here with these distributions?

Susan McCarthy 

This is a common mistake made by employer plans. You don’t have to fight them. You are allowed to roll over distributions that are not RMDs. Since the distribution from the plan is not an RMD under the tax code, once you receive it, simply put it into an IRA within 60 days from the date you receive the check. Distributions from employer plans do not count in the one-per-year rollover rule, so you don’t have to worry about that either.

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