Advantages of Trusts as IRA Beneficiary

• Author: Seymour Goldberg
• Profession: Senior partner in the law firm of Goldberg & Goldberg, P.C., Woodbury, New York
• Pages: 114-115

114

ADVANTAGES OF

TRUSTS AS IRA

BENEFICIARY

Advantages of the trust as a beneficiary

1. If the IRA death benefits are payable directly to a designated ben-

eficiary, then the death benefits may be accelerated at any time by

the designated beneficiary.

2. If the IRA death benefits are significant and payable to the trust,

then a knowledgeable trustee may take advantage of the extended

payout period if the IRS trust documentation requirements are

timely satisfied with the IRA institution. The IRS trust docu-

mentation requirements must be satisfied by October 31 of the

calendar year following the IRA owner’s year of death.

3. A mature trustee will control the investments while the assets are

in the IRA.

4. If IRA death benefits are payable to a trust they may be protected

from the creditors of the designated beneficiary under state law or

in a divorce proceeding.

5. If IRA death benefits are payable to a spendthrift trust they gen-

erally should be protected if the designated beneficiary declares

bankruptcy, provided that the spendthrift trust is recognized

under state law. Most jurisdictions recognize spendthrift trusts.

6. If IRA death benefits are payable to a trust for the benefit of a

minor, it avoids the jurisdiction of the probate court or a similar

court that has jurisdiction over the minor’s assets.

7. If IRA death benefits are payable directly to minor, then the pro-

bate court or a similar court is involved. The probate court or a

similar court may not go along with an extended payout period of

IRA distributions.