Unless there is a specific reason to name a trust, the children should be named directly. An RLT often has no purpose other than avoiding probate. If a child’s trust or special needs trust was the beneficiary, it would make more sense. Also for very large amounts a child’s trust would provide creditor protection of value and perhaps limit access to the funds. Depends on the circumstances. 

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• Our clients generally provide for their children in trust rather than outright.  That keeps the children’s inheritances out of their estates for estate tax purposes, and protects their inheritances from their creditors and spouses, and Medicaid.  The same reasons for leaving other assets in trust apply to IRA benefits.

• But there’s no reason to run the IRA benefis through a revocable trust.  It can’t help, and it sometimes creates problems.  It’s better to leave the IRA to the children, either outright or to trusts for their benefit.

• Revocable trusts make sense in some cases, and in some states.  But for most people, in most states, they’re not necessary, and they tend to be a distraction.

• Bruce Steiner

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