What is Foolsaurus?

It's a glossary of investing terms edited and maintained by our analysts, writers and YOU, our Foolish community. Get Started Now!


How to Name a Revocable Trust as an IRA Beneficiary

Original post by Emory Street of Demand Media

Your financial adviser can help you designate your IRA beneficiaries.

Naming a revocable trust as your IRA beneficiary has the advantage of providing for a long distribution period that allows your assets to grow tax-free. It also has the benefit of providing a tighter control over the money if the trust's beneficiary is a minor. To name a revocable trust a beneficiary, it must become irrevocable upon your death, or sooner and it must be valid under your state's law. Your financial adviser can discuss the potential advantages and disadvantages with you.

Contents

Step 1

Examine the trust document to ensure that it is a look-through trust, which is sometimes called a see-through trust. The IRS requires that the beneficiaries of an IRA be individuals, not charities or other entities. You may only name a trust an IRA beneficiary if all the beneficiaries of the trust are living people, and they are clearly named or identifiable.

Step 2

Check the IRA agreement and the trust document. Make sure that there is no stipulation requiring the trustee to receive the IRA in full upon your death. If this is the case, the beneficiary must pay taxes on the full distribution and he will lose a life expectancy payout. If the IRA agreement does not specifically allow for life expectancy distributions, rollover the IRA to another IRA provider.

Step 3

Give a copy of the trust document to the custodian of your IRA. If you amend the trust at a later date, provide an updated copy.

Step 4

Contact your IRA provider and request a beneficiary designation form. Fill out the form, naming the trust as your IRA beneficiary.


                   

Things Needed

  • Trust document
  • IRA agreement
  • Beneficiary designation form

Resources

References

About the Author

Emory Street has been a freelancer writer specializing in history and health topics for various websites since 2009. She holds a Bachelor of Arts in American studies from Skidmore College.

Photo Credits

  • Comstock Images/Comstock/Getty Images


Advertisement