It is often in the IRA owner’s best interest to name a trust as the beneficiary of the IRA. If done correctly, this can ensure funds stretch out and allow the IRA owner control over who the successor beneficiary will be after the primary beneficiary dies. At the same time, this will also protect the beneficiaries from their inability to manage funds well, their disability, their creditors, and their predators (including ex-spouses). However, IRA trusts are very complex instruments that must be carefully drafted to accomplish these objectives. If the IRA trust is not created to meet certain federal regulations, the beneficiaries could lose most of the benefits of inheriting tax-advantaged IRA assets.
Author: Julius H. Giarmarco, JD, LLM, is chair of the Trusts and Estates Practice Group of Giarmarco, Mullins & Horton, P.C. (Troy, Michigan). Julius received his law degree from Wayne State University and his Masters of Law from New York University. Julius has lectured before the International Forum, AALU, MDRT, LIMRA, and the Financial Planning Association.