Naming a revocable trust as your IRA beneficiary has the advantage of providing for a long distribution period that allows your assets to grow tax-free. It also has the benefit of providing a tighter control over the money if the trust's beneficiary is a minor. To name a revocable trust a beneficiary, it must become irrevocable upon your death, or sooner and it must be valid under your state's law. Your financial adviser can discuss the potential advantages and disadvantages with you.
1. Examine the trust document to ensure that it is a look-through trust, which is sometimes called a see-through trust. The IRS requires that the beneficiaries of an IRA be individuals, not charities or other entities. You may only name a trust an IRA beneficiary if all the beneficiaries of the trust are living people, and they are clearly named or identifiable.
2. Check the IRA agreement and the trust document. Make sure that there is no stipulation requiring the trustee to receive the IRA in full upon your death. If this is the case, the beneficiary must pay taxes on the full distribution and he will lose a life expectancy payout. If the IRA agreement does not specifically allow for life expectancy distributions, rollover the IRA to another IRA provider.
3. Give a copy of the trust document to the custodian of your IRA. If you amend the trust at a later date, provide an updated copy.
4. Contact your IRA provider and request a beneficiary designation form. Fill out the form, naming the trust as your IRA beneficiary.
Items you will need
- Trust document
- IRA agreement
- Beneficiary designation form
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