Clients with Individual Retirement Accounts (IRAs) can consider naming a trust as a beneficiary of the IRA. This technique is a way for the client to protect the interests of certain beneficiaries by placing controls over the distribution of IRA assets. There are situations when a beneficiary might be a small child or a person with special needs. The client may simply want to place spendthrift controls on someone that might be financially irresponsible. Placing the IRA into a trust can also protect certain assets if the client is concerned that the beneficiary might later on be involved in a divorce. The trust that is named as a beneficiary can either be a conduit or accumulation trust. Conduit trusts pass IRA distributions to the beneficiary while accumulation trusts retain the money.
See Donald Jay Korn, Should an IRA Pass to a Trust?, Financial Planning, September 22, 2015.
Special thanks to Jim Hillhouse for bringing this article to my attention.
