Trusts as IRA BeneficiariesTrusts as IRA Beneficiaries

In the August 2017 issue of Trusts & Estates, Emily Kembell artfully framed the moment when an estate-planning attorney’s heart may skip a beat. The client wants a revocable trust drafted that will also serve as the beneficiary of a traditional individual retirement account.¹ The engagement has lurking danger.

Step 1, describing the beneficiaries’ interests following the IRA owner’s death, presents no challenges. The trust’s terms include mandatory income and discretionary principal distributions to a beneficiary for life (lifetime beneficiary). At this beneficiary’s death, two other individuals (primary remaindermen) share a right to complete distribution of the trust’s assets. But, the outright distribution comes with a condition. The p...