What if you have an IRA that you want to leave to one or more individuals, but you do not want them to have unfettered access to the money?
You have read that only individuals can be beneficiaries of an IRA, and your financial planner may have told you that you cannot use a regular trust. Are these statements correct?
The beneficiaries of an IRA must be individuals – known as “Designated Beneficiaries;” and while most trusts cannot be used to deal with the distributions from an IRA, the See-Through Trust (STT) can solve your problem. Here’s how it works!
You, as the Participant in the IRA Plan, remain the owner. You provide on the “Designated Beneficiary” line of the Beneficiary form that benefits are the names individuals “according to the terms of Article X of the John Doe Trust under your Last Will and Testament. If the administrator of the Plan will not accept it, go to another administrator! The terms of the trust under your Will will qualify the beneficiaries as Designated Beneficiaries and will require the trustee to remove at least the minimum required distribution from the trust each year and distribute it to the Designated Beneficiary(ies).
If there is a surviving spouse, using the STT will deprive him/her of rolling over the IRA into his/her own IRA, thereby using their own life expectancy, but if you want the IRA to be controlled, the STT is the way to go.