Q&A

Can a trust be the beneficiary of an IRA?

Can a trust be the beneficiary of an IRA?

A: You cannot put your IRA in a trust while you are living. You can, however, name a trust as the beneficiary of your IRA and dictate how the assets are to be handled after your death. This applies to all types of IRAs, including traditional, Roth, SEP and SIMPLE IRAs.

When to leave an IRA to a trust?

A trust can be a good choice in second marriages where you want to control the ultimate disposition of your IRA. You may want to leave your spouse the annual IRA income, but after your spouse’s death you may want to make sure that the IRA goes to your children.

Can a retirement account be held in a trust?

As the name implies, individual retirement accounts can only be owned by an individual. They cannot be held jointly, nor can they be conducted by an entity, such as a trust or small business. Additionally, contributions can only be made if certain criteria are met. For example, the owner must have taxable earned income to support the contributions.

Can a joint IRA be held in a trust?

They cannot be held in joint name, nor can they be held by an entity, such as a trust or small business. Additionally, contributions can only be made if certain criteria are met. For example, the owner must have taxable earned income to support the contributions. A nonworking spouse can also own an IRA,…

When does a trust become a beneficiary of an IRA?

The trust is irrevocable or will, by its terms, become irrevocable upon the death of the IRA owner. The beneficiaries of the trust are identifiable. A copy of the trust documents is provided to the IRA custodian by Oct. 31 of the year immediately following the year in which the IRA owner died.

Can a retirement account be retitle to a living trust?

You can retitle qualified retirement accounts, such as 401 (k)s, 403 (b)s, IRAs, or qualified annuities to the name of the trust. However, this triggers income taxes on the entire amount in the year the transfer takes place.

What happens if I change the name of my IRA to a living trust?

A living trust is a legal entity set up to hold property for eventual distribution to your beneficiaries. The IRS has indicated that changing the owner of your IRA or 401 (k), even to the name of your trust, is considered a 100% withdrawal from the account.

Can a living person be a beneficiary of an IRA?

There are trade-offs and consequences. Trusts as IRA beneficiaries create unique problems and tax complications. Many IRA owners will name a living person as beneficiary of their IRA. Often that person is a spouse or child. You could simply name that person on the IRA beneficiary designation form.