Living trust as IRA secondary beneficiary
Ken
as secondary beneficiary of my IRA?
Dave
> My wife and I have a joint living trust. May I name this joint trust
> as secondary beneficiary of my IRA?
That's what we've done. Spouse first, then children, then trust.
Dave
PeterL
Can a trust own an IRA? I thought an IRA can only be owned by an
individual.
Dave
A trust cannot own an IRA, but a trust can be a beneficiary of an IRA.
If the trust inherits the IRA, then the IRA would have to be
distributed. But that occurs only when all of the named human
beneficiaries are deceased.
Dave
pomegranate-man
>>>> as secondary beneficiary of my IRA?
>>> That's what we've done. Spouse first, then children, then trust.
>> Can a trust own an IRA? �I thought an IRA can only be owned by an
>> individual.
> A trust cannot own an IRA, but a trust can be a beneficiary of an IRA.
> If the trust inherits the IRA, then the IRA would have to be
> distributed. But that occurs only when all of the named human
> beneficiaries are deceased.
So instead of the trust, could one name the grandchildren?
The motivation would be to keep the funds in an IRA as long as possible,
deferring taxes.
Cam
wrote:
> The motivation would be to keep the funds in an IRA as long as possible,
> deferring taxes.
When I inherited my mother's IRA I kept it in a "Beneficiary IRA". I
have to take Recommended Minimum Distributions every year (this year
was a recession exception). It's like the reciprocol of your life
expectancy. If you have a life expectancy of 20 years left, you have
to take out 5%. This IRS is very interested in money getting taxed.
PeterL
Were you not able to put the IRA into a stretch IRA?
Cam
I believe my mother's IRA was considered to be a Stretch IRA. When I
inherited it, it became a Beneficiary IRA. My personal IRA could
become a Stretch IRA, but this is different money than the IRA I
inherited. Again, the IRS wants money to be taxed and not deferred
indefinitely. The penalty for failing to take an RMD can be as much
as 50%. Always consult an accountant for reliable information about
your particular situation. Tax code is almost always complicated.
BreadW...@fractious.net
> On Oct 5, 2:35�pm, Cam <camg...@att.net> wrote:
> > On Oct 4, 2:32�pm, "pomegranate-man" <pomegran...@emailNot.invalid>
> > > The motivation would be to keep the funds in an IRA as long as possible,
> > > deferring taxes.
> > When I inherited my mother's IRA I kept it in a "Beneficiary IRA". �I
> > have to take Recommended Minimum Distributions every year (this year
>
> Were you not able to put the IRA into a stretch IRA?
That *is* using it as a "stretch" IRA. There's no actual
account called a "stretch IRA". You won't find it on your
brokerage account forms, etc. What there is, however, is
an _inherited_ IRA and by careful selection of the beneficiary,
and management of the required distributions from an IRA, one
may "stretch" out the period of RMDs thus maximizing the time
money spends in the IRA growing tax-deferred.
The "stretch" part is when the beneficiary is significantly
younger than the deceased. Instead of distributing the whole
IRA balance immediately or within the 5yr period (which is
sometimes required for certain situations), the distributions
are taken over the much longer life expectancy of the young
beneficiary - and thus the RMDs are much smaller and the
IRA is thus stretched to a much longer period of tax-deferred
growth than would have otherwise been possible.
The rules for this get messier if the beneficiary is not
an individual, and there are some variations, particularly
for dealing with the difference between a spouse inheriting
an IRA vs. a non-spouse, and if the deceased had already
started taking RMDs before his death or not.
See IRS Pub 590 for details in the RMD section.
My wife and I have a joint living trust. May I name this
joint trust as secondary beneficiary of my IRA?
You can, but it has certain implications which are not
necessarily what you want. It certainly makes it more
difficult for the ultimate beneficiaries of the assets
to stretch out the RMDs. In order for it to stretch out
according to the life expectancy of the beneficiaries,
the rules are more complex, and it's much more likely
that the IRA will have to be distributed according to
the 5yr rule or according to your, rather than your
beneficiary's life expectancy. Again, see pub 590.
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