It's not a good idea to name a trust as the beneficiary of your IRA because the IRA will lose the benefit of tax-deferred growth. This is because the IRA will have to be distributed more quickly and then taxed in a different way compared to other situations. The same applies if a business entity or asset is a beneficiary. You can't deposit your Individual Retirement Account (IRA) in a trust while you're living.
However, you can name a trust as the beneficiary of your IRA and dictate how the assets will be managed after your death. This applies to all types of IRAs, including traditional IRAs, Roth, SEP and SIMPLE. If you set up a trust as part of your estate plan and want to include your IRA assets, it's important to consider the characteristics of an IRA and the tax consequences associated with certain transactions. Retirement accounts definitely don't belong in your revocable trust, such as your Roth IRA, 401K, 403b, 457, and the like.
Placing any of these assets in your trust would mean that you are taking them out of your name in order to re-title them in the name of your trust. Tax ramifications can be disastrous. The general rule is that when the beneficiary of an IRA is not a natural person, the IRA must be distributed in full within five years. When you name a trust, estate, or business entity as a beneficiary, an IRA must be distributed quickly and taxed.
Including your IRA or 401 (k) plan in your housing trusts means you'll have to change the title of your plan in the name of your trust. That can pose some serious tax problems. This allows you to take an inherited IRA distribution and transfer it to an IRA in your name without having to include any part of the distribution in gross income, provided that the transfer was made within 60 days of the distribution. He planned to have the IRA balance distributed directly to him and would transfer it to an IRA in his name within 60 days.
This is probably because the IRA depositary was unwilling to transfer the inherited IRA to any IRA other than one with exactly the same legal title. That means that all the money in a traditional IRA must be withdrawn within five years of the death of the IRA account holder. The important factors to consider are how the beneficiaries take possession of the IRA assets and over what period of time. In each case, the surviving spouse was effectively the only person for whose benefit the IRA was maintained and intended to be maintained.
Work closely with a probate planner, lawyer and accountant, who are well versed in trusts and IRAs, to maximize the legacy. Second, for those who were covered, IRAs provided a place for retirement plan assets to continue to grow when the account holder changed jobs through an IRA renewal. The general rule is that an inherited IRA can only be transferred to another tax-free IRA if both IRAs have the same name or title. While trusts can streamline most areas of estate planning, they can create more paperwork and even additional tax burdens for beneficiaries of an inherited IRA.
Another exception was mentioned in a recent IRS ruling and shows that a penalty may not be imposed if your spouse's revocable living trust is listed as an IRA beneficiary. A non-working spouse can also own an IRA, but must receive contributions from the working spouse and the income of the working spouse must meet the criteria. If Jim includes a charity, or anyone other than an individual, as the primary or remaining beneficiary, the trust cannot be treated as a transparent trust and the IRA must be liquidated (and income taxes due) according to the IRS rules for IRAs without a beneficiary included in the list. .