beneficiary trust | Ed Slott and Company, LLC

beneficiary trust

I have a client that has created and named his beneficiary trust as the contingent beneficiary of his IRA. His spouse is primary. I thought I read that with the SECURE Act naming this type of trust may not be beneficial anymore. Can you elaborate on this?

There may still be benefits such as creditor protection, but the life expectancy stretch for most trusts was replaced by the 10 year rule.  Exceptions are trusts for disabled or chronically ill beneficiaries, beneficiaries not more than 10 years younger, minor children of the IRA owner etc. These classes are known as eligible designated beneficiaries (EDBs). For non EDBs, the 10 year rule will apply. One possible work around is leaving the IRA to a CRUT, which will replicate the life expectancy stretch of old.

See my article in the April 2020 issue of Trusts & Estates on using charitable remainder trusts to replicate the stretch:  https://www.kkwc.com/wp-content/uploads/2020/06/Charitable_remainder_trusts_replicate_the_stretch_-_Trusts__Estates_4_2020.pdf .

 

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