Disclosure Issues and IRA Trusts

• Author: Seymour Goldberg
• Profession: Senior partner in the law firm of Goldberg & Goldberg, P.C., in Woodbury, New York
• Pages: 76-81

76

DISCLOSURE ISSUES

AND IRA TRUSTS

An IR A trust is a different type of trust that is not a form-book t ype of

trust. It can be a separate trust that is dedicated to the receipt of distri-

butions from an IR A or it can be a tru st under a will.

The separate trust t hat I recommend is created during the lifetime

of the grantor and has all t he terms that satisf y the IRS rules, including

the IRS regu lations and IRS letter ru lings and the state trust laws. In

addition, the separate dedicated trust can be a dedicated revocable trust

or a dedicated irrevocable trust. It is best to use a dedicated irrevocable

trust for creditor rights protection purposes. A n irrevocable trust is not

an irrevocable beneficia ry.

No matter what, the IRS post-death tr ust documentation require-

ment must be timely satisfied with the IRA institution by no later than

October 31 following the year of death of the IRA owner.

After the death of t he IRA owner, the tr ustee must file annual fidu-

ciary income ta x returns w ith the IRS and t he state if fiduciary income

tax returns are required.

In the event that the IRA trust is not a qualify ing IRA t rust, then

there may be significant problems for the trustee, tr ust beneficiar y,

trust attorney, and trust accountant.

The disclosure issues involvi ng IRA trust s are best illustrated by the

following examples.

SITUATION 1

Scott, an IR A owner, creates a trust for the benefit of Mart ha, his daughter.

He designates the Scott tr ust as the beneficiary of his I RA. Scott is advised

that this trust can receive required minimum distributions from his I RA

after his death based on t he life expectancy of Mart ha as determined in the

year after Scott’s death. Murray is t he trustee of the Scott trust.

The attorney draft s the trust that provides that the Scot t trust shall

receive the required min imum distributions from Scott’s IRA each yea r

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