by Robert Mansour
An IRA is an Individual Retirement Account. When it comes to putting assets in the name of your trust, an IRA is an asset that you will not transfer to your trust. A trust cannot own an IRA. It must be owned by a human being. IRAs pass instead by way of designated "beneficiary." That means, when you set up the retirement account, the financial institution would have asked you who you want to name as your beneficiaries. In most cases, you will be able to name a primary beneficiary along with a secondary or "contingent" beneficiary. One of the benefits of the estate planning process is making sure you actually have the correct beneficiaries you wish to have. Also, many people are surprised to discover they only have a primary beneficiary and no back-up beneficiaries (secondary or contingent). In some cases, they have the entirely wrong people named. The estate planning process forces you to check on this issue (not only for your IRA accounts but you should also check any other assets that pass by way of a named beneficiary).
There are some situations when naming an individual would not be the best idea. In some cases, naming a trust as a beneficiary is a good idea. For example, you might be concerned how a child would handle the inherited IRA. However, to do so, a trust must meet certain minimum requirements. Also, naming the entire living trust versus subtrusts within the living trust may not be a great idea. Sometimes, it is better to name certain subtrusts instead. For example, instead of naming your entire trust as the beneficiary, you can say "Subtrust for Johnny Smith, per the Smith Family Trust dated 3-27-12." Otherwise, the oldest living beneficiary of your living trust may govern distributions for all those named and that might not be what you want. You can also set up a stand-alone IRA Trust to receive the distributions. This is the cleanest but more expensive route. Make sure you discuss these options with an experienced estate planning attorney.