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Ira beneficiary

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n78949

Junior Member
What is the name of your state (only U.S. law)? Indiana

My late father was the named beneficiary of my mother's IRA. She has (and they had) a revocable living trust. Should she make the trust the beneficiary of the IRA? Or possibly her church? Or possibly her offspring as multiple named equal beneficiaries? (Church and offspring will be ultimate beneficiaries of her estate.) The eventual estate will be less than $1m.

Ideas, pro or con, are appreciated. Thanks.
 


curb1

Senior Member
My call would be to make the beneficiaries the recipients of the IRA instead of the trust and make it clean and fast.

Having said that ......


"Designating a trust as the beneficiary of an IRA can be an effective estate-planning tool. However, it is effective only if all the parties involved - especially the IRA owner, the IRA custodian, the trustee of the trust and any attorneys representing the beneficiary - agree on the interpretation of the provisions of the trust and applicable laws. Conflicting interpretations could result in a delay of disposition of the assets and can be quite frustrating for those involved. Designing a trust is a complex process. The IRA owner should seek the assistance of a competent attorney and tax professional to determine if and when a trust is appropriate, the type of trust that suits the IRA owner's needs and to ensure that estate planning needs are met and maximized."
 

curb1

Senior Member
What is the status of the IRA at this time? Was it a Roth IRA, a traditional IRA, or what?

Be aware to transfer the assets of the IRA directly into an "Inherited IRA".
 

cindy612

Junior Member
There are tax issues involved with receiving an IRA as a beneficiary.

For the trust to inherit, the taxes become due and payable, usually from the proceeds of the IRA and at the trust's tax rate.

For children to inherit, they would be required to take RMD (required minimum distributions) for their expected lifetime and will be taxed on these distributions based upon their current tax bracket. Depending on the value of the IRA's, these annual RMD's may push your children into a higher tax bracket.

If the charity inherits the IRA, it pays no taxes, and the full amount is received by them.

The IRA has enjoyed tax free contributions and growth during your father's ownership, IRS wants these taxes. Having the charity as beneficiary is a good way to see the full amount go to good use.

This is not advisable for a ROTH, where all the tax favored benefits are lost if given to charity. Best to leave this to your heirs.

It is best to discuss this with your accountant and financial adviser.

I agree with Curb1, definitely make sure you transfer Dad's IRA into an inherited IRA in Mom's name. Depending on her age, she will not have to take RMD's from this account until 70 1/2, or take RMD's now at her current age if above 70 1/2.
 
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