Roth IRA re-registered in a living trust
My clients attorney is writing a living trust for them and suggesting that their Roth IRA be re-registered and owned by the living trust. This doesn’t makes sense to me but I can’t find information to give to my clients or their attorney. Can you help? What benefits of owner or beneficiary are lost (if any) if this happens?
Permalink Submitted by Alan Spross on Thu, 2008-01-31 17:50
An IRA cannot be owned by a non individual, so either this attorney does not understand that or is just mis stating an intent to name the trust as primary or contingent beneficiary on the IRA.
The trust should not be the IRA beneficiary unless there is a specific reason, such as limiting beneficiary access to the total account or for creditor protection benefits or estate tax relief for funding a credit shelter trust. In those cases it is critical that the trust be qualified for look through treatment or the beneficiary will lose the opportunity to stretch distributions over his life expectancy.
Permalink Submitted by Bruce Steiner on Fri, 2008-02-01 00:51
If you want to leave some or all of the IRA to the credit shelter trust, then leave some or all of the IRA to the credit shelter trust, not to the living trust. See TAM 200644020.