IRA Retirement: Naming a Trust | Lord Abbett

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Naming a Trust

Why would an IRA owner want to name a trust or non-person as a beneficiary?

A qualified trust creates a mechanism for the decedent to control post death withdrawals.

A trust to be deemed a qualified “look through” must satisfy several of IRS requirements. It's referred to as a look-through trust because one can look through the trust to the named beneficiaries.

To qualify as a look-through the trust must meet the following requirements:

  1. The trust must be a valid trust under state law;
  2. The trust must be irrevocable at death;
  3. The beneficiaries of the trust must be identifiable from the trust document; and
  4. The trust documentation has been provided to the IRA custodian no later than October 31st of the year after the IRA owner’s death.

If a trust does not satisfy the look-through requirements, the decedent is treated as though he or she did not have a designated beneficiary. Therefore, post death minimum distributions will be made over the account owner's life expectancy (had he/she lived) if the account owner dies on or after their required begin date (RBD), which is April 1 of the calendar year after attaining age 72. If the owner dies prior to their RBD, the account must be exhausted by the end of the fifth year that includes the anniversary of his/her death. 

This discussion regarding the option to name a trust as a beneficiary and its effect on the IRA proceeds post-death is not intended to be tax or legal advice. When an IRA beneficiary designation is made, including whether a trust should be incorporated into that designation, the individual making the designation should review this serious matter with their tax or legal advisors before proceeding.

Please consult an IRA specialist at 888-522-2388 for additional information.

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