What you should
know about naming an IRA beneficiary.
Provided by Taylor McClish
Can your IRA be put directly into a trust? In short, no. Individual retirement accounts (IRAs)
cannot be put directly into a trust. What you can do, however, is name a trust
as the beneficiary of your IRA. The trust would inherit the IRA upon your
passing, and your beneficiaries would then have access to the funds, according
to the terms of the trust.1
Can you control what happens to your IRA assets after your
death? Yes. Whoever was named the
beneficiary will inherit the IRA. But you also can name a trust as the IRA
beneficiary. In other words, your chosen heir is a trust. When you have a trust
in place, you control not only to whom your assets will be disbursed, but also
how those assets will be paid out.2
Using a trust involves a complex set of tax rules and regulations.
Before moving forward with a trust, consider working with a professional who is
familiar with the rules and regulations.
The trust can dictate the how, what, and when of income
distribution. A trust will allow
you to specify an amount your heir may receive. Or, you could include language
that requires your heir to take monthly or annual distributions. You can even
stipulate what the money should be spent on and how it should be spent.2
Why would I use a Trust instead of a Will? There are a couple reasons. The biggest is that a will
always passes through probate. That means a court oversees the administration
of your will and ensures that the bequeathed assets are correctly distributed.
One thing to keep in mind, though, is that this may lead to an expensive,
slower process. A living trust, on the other hand, can help certain assets
avoid probate. This may save your estate and heirs both time and money.
Finally, for those who would like to keep their arrangements discreet, a trust
can remain private whereas a will is a matter of public record.2
That sounds complicated. If decisions about your IRA are complicated, it may be best to review your choices with a trusted financial professional who can explain the pros and cons of naming a beneficiary to your account.3
Taylor McClish may be reached at (503) 239-3060 or Taylor.McClish@cunamutual.com
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necessarily represent the views of the presenting party, nor their affiliates. This
information has been derived from sources believed to be accurate. Please note
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Securities sold, advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor. CBSI is under contract with the financial institution to make securities available to members. Not NCUA/NCUSIF/FDIC insured, May Lose Value, No Financial Institution Guarantee. Not a deposit of any financial institution. CUNA Brokerage Services, Inc., is a registered broker/dealer in all fifty states of the United States of America.
Citations.
1 -irs.gov/retirement-plans/plan-participant-employee/retirement-topics-beneficiary
[10/17/19]
2-elderlawanswers.com/understanding-the-differences-between-a-will-and-a-trust-7888#:~:targetText=Both%20are%20useful%20estate%20planning,soon%20as%20you%20create%20it.
[9/19/19]
3 -bankrate.com/investing/what-is-a-trust/ [6/4/19]