3/30/2023 0 Comments Lookthrough trust languageSpouses are allowed roll over the decedent’s IRA assets into their own IRA tax-free. Naming a trust as an IRA beneficiary may not be practical for people who plan to bequeath their IRA to a spouse, rather than their children, grandchildren or others. The terms of a trust can stipulate the way in which distributions are made if an heir is a minor, disabled, financially unreliable, incapacitated or vulnerable. Trusts also allow for some control over the assets. However, heirs who inherit an IRA directly-not through a trust-don’t receive those protections, unless provided by state law. Taxpayers enjoy state and federal protections for IRA assets during their lifetime. The trust would inherit the IRA upon the owner’s death, and beneficiaries of that trust would have access to the funds.Īsset protection is one rationale for making this move, because some trusts shield IRA assets from lawsuits, business failures, divorce and creditors. Therefore, a trust may only be named as the beneficiary of the IRA. Investment News’ recent article on this subject asks “Should you name a trust as an IRA beneficiary?” The article explains that individual retirement account assets can’t be put into trusts directly during a person’s lifetime, without destroying the IRA’s tax shelter. Naming a trust as beneficiary of your IRA has many benefits. You need to get it right, because this may be your biggest asset. There are many pros and cons to naming a trust, rather than an individual as a beneficiary of the IRA.
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