When you prepare a living trust as part of your estate plan, you need to consider how you'll fund the trust with your assets. Although the transfer process is rather straightforward for most assets, such as your home, bank accounts, and stocks, the transfer process for IRA accounts is complex. In fact, it may be preferable to leave your IRA out of the trust. In some situations, you IRA account provides tax benefits that may be lost if it is transferred to your trust or if it is not transferred properly. This is one area of estate planning where seeking professional advice is crucial.
Step 1
Consult with your attorney or other estate planning adviser about placing your IRA into your living trust by changing the beneficiaries on the IRA. In some situations, such as a married couple with separate IRA accounts, you may be advised to leave the IRA out of the trust so that the rollover option for the surviving spouse is not lost. If your attorney or adviser agrees that placing the IRA in the trust helps accomplish your estate planning goals, you'll have to make your living trust the beneficiary of your IRA.
Step 2
Contact the custodian of your IRA, which may be a bank or other financial management company, to request a change-of-beneficiary form. Since changing a beneficiary is relatively common, you may want to check the company's website for an online form. In any case, you should be able to request that the form be mailed to you.
Step 3
Complete the change-of-beneficiary form provided by the custodian of your IRA. You'll need to provide the specific name of the trust to be the new beneficiary, for example, "To the William Johnson Family Trust dated January 1, 2010." If the form is at all confusing, take it to your attorney or estate planning adviser for assistance.
Step 4
Return the completed change-of-beneficiary form to your IRA custodian.
Tips and Warnings
- If the funds in your IRA account exceed $200,000, you may want to consider establishing a separate IRA trust to achieve maximum tax advantages for distribution of the funds. IRA trusts are complex, however, and should not be set up without the services of a qualified accountant and attorney.
- In no event should you simply transfer the funds from you IRA account into another account in the name of your trust. This will be considered a distribution of your IRA, which is a taxable event and, depending on your age, may result in additional penalties.
Things You'll Need
- Living trust
- Change of beneficiary form
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