Trusts and IRAs

On Behalf of | Jul 29, 2019 | Trusts |

An individual retirement account is a popular retirement-saving tool for adults in Georgia. Choosing a trust as an IRA beneficiary can yield several benefits. However, before an estate owner can designate a trust as the beneficiary to their IRA, they should be aware of the requirements for doing so.

For starters, the trust must be valid according to state law and should be irrevocable or drafted to become irrevocable after the death of the creator. A creator cannot designate entities other than other individuals as the trust’s beneficiaries. For example, a favorite charity cannot be made a beneficiary of the trust to receive the IRA funds. Also, the trustee is required to submit to the IRA’s custodian a certified list or trust document that names the beneficiaries no later than the end of October of the year after the passing of the IRA owner.

Designating a trust as an IRA beneficiary necessitates careful planning. The creator has to be prepared to address the costs associated with structuring and managing the trust. Trust designation is a process that is more complicated than that of simply naming an IRA beneficiary, and it can be easy to make a costly mistake.

A married estate owner should also consider that their spouse will be unable to roll the IRA into their own IRA free of taxes. If the funds from the IRA are rolled over into their spouse’s IRA, that account would have a higher growth rate.

An attorney who provides estate planning services may advise a client about how trusts can be used to protect assets. Legal counsel could further explain the process of designating a trust as an IRA beneficiary.

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