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For many, their Traditional Individual Retirement Account (IRA) represents their largest financial asset. Most retirees name adult individuals as their beneficiaries. Yet some IRA owners want to name a trust as a beneficiary of their IRA.

Naming a trust as an IRA beneficiary can have adverse income tax consequences. However, if the trust qualifies as a "seethrough trust", then after the iRA owner's death, you can through the trust to the underlying trust beneficiaries, and the required minimum distribution rules will apply as if those trust beneficiaries were designated as beneficiaries.

One of the four requirements to get the favorable seethrough trust tax treatment is that the trust be irrevocable. But just because you name an irrevocable trust as a beneficiary of your IRA does not mean that you cannot change our beneficiary.

It is not an irrevocable beneficiary designation. It is an irrevocable trust that is a beneficiary of your IRA. But an IRA owner can change their beneficiary at any time. So you're not locked into anything permanently by naming an irrevocable trust as a beneficiary of your IRA.

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This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais
Estate Planning Attorney