While there are no tax benefits, there may be situations in which you want to name a trust as your IRA beneficiary. If properly structured, and in keeping with IRS requirements, an IRA Beneficiary Trust can help ensure that the beneficiaries will effectively use the required minimum distribution “stretch-out” to build wealth for their future.

Especially for larger inheritances, this kind of trust is a means of controlling distributions after one’s death and restricting access to beneficiaries who may not be able to properly handle management of IRA funds and taking required distributions.  Another reason to name a trust as an IRA beneficiary is to protect the funds from creditors and bankruptcy. The trust, not the beneficiary, is the actual owner of the assets, so they remain protected if a beneficiary becomes insolvent or creditors pursue him or her.

An IRA trust can be used to hold money for estate taxes and provide for distribution in a variety of ways to individual beneficiaries, such as in annual or lump sums.  An individual can also assign a trusted family member or advisor to act on behalf of the beneficiaries to help ensure sound business decisions are made on behalf of the beneficiary.

In all, an IRA Beneficiary Trust can protect your beneficiaries against financial predators, creditors, lawsuits, government intervention, and other unwanted scenarios.  The IRS will ultimately get its due, as each beneficiary will need to file a separate tax return; however, the benefits can easily outweigh the paperwork in the long run.

When you need guidance on how to set up your estate—regardless of size—to protect your assets and define your legacy, please contact Terri Hilliard Olson for a free, initial consultation.  Call 805-778-0111 or e-mail thilliard@terrihilliard.com.