Orange County Estate Planning Attorney James F. Roberts answers FAQ and gives information on what is currently happening in estate planning. In this video he discusses naming the trust as a beneficiary to an IRA account….(read more)

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For many individuals, an individual retirement account (IRA) is a primary vehicle saving for retirement. IRAs can offer significant tax advantages, as well as flexibility and control over the distributed funds. However, many individuals may not know the benefits of naming a trust as a beneficiary to their IRA.

There are several reasons why someone may choose to name a trust as the beneficiary to their IRA. For example, a trust can provide asset protection for beneficiaries, control over the distribution of assets, and the ability to transfer assets to future generations.

Asset Protection:
Typically, when an IRA is passed down to a beneficiary, the assets can be subject to creditor claims or legal judgments. By naming a trust as a beneficiary, the assets in the IRA can be protected from these potential risks. The trust safeguards the assets and can limit a creditor’s ability to access them.

Control Over Distribution:
Naming a trust as an IRA beneficiary can also offer greater control over the distribution of assets. When a beneficiary inherits an IRA outright, they have complete control over the distribution of assets, which can result in unwanted tax consequences or overspending. Alternatively, a trust can provide guidance and limits over how the assets are distributed to the beneficiaries to avoid these challenges.

Ability to Transfer Assets:
Finally, owning an IRA outright may limit who the assets can be transferred to after the beneficiary’s death. By naming a trust as a beneficiary, the assets can be passed down through the trust to future generations. Additionally, the trust can include provisions that ensure the assets are distributed in a tax-efficient manner and cannot be squandered.

Naming a trust as a beneficiary to an IRA is not for everyone, and depends on an individual’s specific circumstances. Before making this designation, it is important to speak with an experienced estate planning attorney who can help you determine if naming a trust as a beneficiary is appropriate for you.