Using trusts as IRA beneficiaries

On Behalf of | Jul 24, 2019 | Trusts

A popular tool used to save for retirement is an individual retirement account. If a Nevada resident decides to use an IRA, they will have to determine where the funds should go when they pass away. One way to ensure that IRA funds are handled according to one’s wishes after death is to designate a trust as the IRA beneficiary.

A trust can be named as an IRA beneficiary when the account is being established with a brokerage. For someone who wants to change a beneficiary on an existing IRA account, they should go to the online portal for their financial institution for directions for amending beneficiary designations.

There are many reasons individuals should consider a trust for IRA beneficiaries. Doing so gives them significant control over the assets as a trust can stipulate in what manner the funds should be distributed. This can be particularly helpful if the creator wants to leave the funds to someone other than a spouse. Using a trust as an IRA beneficiary also provides certain tax benefits that come with an IRA.

A trust can be ideal if the estate owner wants to leave the IRA funds to someone who may not be able to assume the responsibility of handling lots of money. This may be a minor, person with a disability or someone who is financially irresponsible. The creator can also use the trust to protect the funds from a beneficiary’s creditors or divorce.

An estate planning attorney may help a client create a trust that can properly manage assets. Counsel could explain how certain types of trusts will work better for the client’s goals.