An IRA trustee is an entity that oversees the administration of an individual retirement account, a form of retirement plan that is available in the United States. Trustees have a responsibility to maintain the plan in compliance with regulations issued by the internal revenue service (IRS). It's not uncommon for owners of an individual retirement account (IRA) to designate a trust as their beneficiary. By using a trust, the owner of an IRA retains some degree of control over how assets are distributed after their death.
However, while a trust is an effective estate planning tool, IRA owners must take steps to ensure that the desired outcome is consistent with their needs. Certainly, from the perspective of real estate legislation, an estate can be called a beneficiary, but keep in mind that an estate does not have a life expectancy, so the available period is limited to five more or longer years and the remaining life expectancy of the owner of the IRA. In addition, any IRA assets payable to the inheritance will be exposed to the creditors of the IRA owner. However, if neither income tax nor creditor issues are a cause for concern, then an estate can certainly be named a beneficiary.
If the trust identifies a specific beneficiary or beneficiaries to receive all withdrawals from the IRA account, that person or entity will be treated as a direct beneficiary of the IRA. However, with a fiduciary IRA, continuity of control and management are maintained, even if the owner of the IRA is incapacitated, thanks to the continued role of the trustee himself. In the case of a trust, the beneficiaries of the trust, and not the trust itself, are used to determine the classification of the beneficiary of the IRA. The reason is that a fiduciary IRA is, in effect, like a “beneficiary of a conduit trust” of an IRA, one in which all RMDs are automatically transferred to the underlying beneficiaries.
And the ability to restrict access to both the IRA itself and to the RMDs is very important for many estate planning strategies. Some people choose to name a trust, not an individual, as the beneficiary of their IRA and other retirement accounts to protect themselves from risks such as those mentioned above. . In addition, using a fiduciary IRA to restrict the beneficiary's ability to access money provides an asset protection benefit: since the beneficiary cannot liquidate the account on his own, a judge cannot force him to liquidate the account for credit, which is important in the case of Clark v.
However, since there is no standardization in trust language for fiduciary IRAs, it may be necessary to hire an estate planning attorney, just to carefully review the trust documents of the Fiduciary IRA and ensure that the Fiduciary IRA restrictions are in line with the estate plan (and are properly understood). The owner of the IRA could guarantee these conditions in the trust provisions, which the trustee would be responsible for implementing. And, in the end, there is a risk that, if future beneficiaries are not satisfied with the provider of a fiduciary IRA, there will be no effective way to switch providers after the death of the original owner of the IRA. Some trust IRA providers “will allow the transfer of the trust IRA,” but it should be noted that this would only be allowed if the receiving institution is committed to complying with all the trust provisions of the original trust, which may or may not be feasible for the new institution, if its systems are not designed to manage the way the previous vendor's trust IRA was structured.
However, the number of fiduciary IRA providers has been increasing in recent years, in part because the fiduciary IRA is very attractive from the perspective of the IRA provider, since, as a trustee of the IRA itself, it is very difficult for future beneficiaries to fire the trustee or transfer the account to another provider, allowing the trust IRA provider to be more likely to hold the assets than an IRA provider with traditional custody. As a result of the Security Act, any eligible designated beneficiary must withdraw the balance from the IRA account for the life expectancy of the beneficiary or owner. This is only the case when the trust is unable to accumulate funds before disbursing IRA withdrawals directly to its beneficiaries. .