Managing IRAs in estate planning

On Behalf of | Jun 27, 2016 | Estate Planning

Nevada residents may be interested in reading about different strategies for how to leave an IRA to beneficiaries. While many people designate beneficiaries as heirs of their IRA funds, the account can also be effectively arranged into a person’s estate plan, such as naming a trust as the IRA’s beneficiary.

A surviving spouse of an IRA holder usually automatically inherits the account funds at the holder’s death. However, if the surviving spouse has not yet turned 59 1/2, he or she can arrange the IRA as an Inherited IRA. This approach will keep the name of the deceased spouse on the account, while the surviving spouse will be able to withdraw a part of the funds. Once the surviving spouse reaches 59 1/2, he or she can roll over the IRA into his or her name.

In instances where the IRA holder dies and his or her only surviving family members are children or other non-spouse individuals, they usually are named as the beneficiaries. If, however, the IRA holder’s beneficiaries include a spouse from a second marriage, underage children, or a spouse and/or children who are incapable of managing the IRA themselves, the IRA holder might consider naming a trust as the beneficiary of the IRA instead. A trust also provides asset protection in the event of a divorce or legal judgment.

For many people, naming a trust as their IRA’s beneficiary may be a good idea, especially if the IRA holder has complicated family issues. However, the process of setting up a trust fund is generally difficult and must be written to exactly agree with the law. Moreover, mistakes can be time consuming, expensive and difficult to correct. IRA holders who are considering this option may wish to consult an experienced attorney for advice. Source: AL, “When an IRA should be held in a Trust”, Stewart Welch, June 22, 2016