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James A. Jones, Attorney At Law
Plan Today, Peace of Mind Tomorrow

IRAs and trust beneficiaries

Washington residents who want to save for retirement may want to consider using an individual retirement account. If they decide to use an IRA, one of the things individuals should consider is to whom the funds should be left when they die. Some individuals may consider designating a trust as their IRA beneficiary.

Individuals who establish an IRA with a brokerage will typically be asked to choose a beneficiary. It is at this time that they can designate their trust. For individuals who have a new trust, they can review their financial institution's online portal for instructions for modifying their beneficiary. Careful planning is necessary in order to name a trust, and consultation with a financial advisor is advised before doing so.

There are various reasons individuals should consider naming a trust as their IRA beneficiary. One reason is that it can allow them to dictate how the distribution of the assets should be handled, which can be helpful in situations where someone other than a spouse is named as the IRA beneficiary. It also allows individuals to reap the tax benefits that come with an IRA while still being able to regulate the funds.

Using a trust as an IRA beneficiary can also help protect the funds from beneficiaries who may not be able to properly manage the funds. For example, individuals may want to designate a trust for heirs who have mental disabilities, are minor children or are adults who are financially irresponsible.

An attorney who practices estate planning law may advise clients about how a trust can be used in a tailored estate plan. The attorney may consider the financial assets and goals of a client and recommend certain types of trusts. Assistance may be provided for drafting the provisions of a trust to ensure that a client's wishes regarding the management of the assets are honored.

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