When a trust is beneficiary of an IRA, it is usually so designated as a way to defer IRA distribution (and delay taxation of that income) for as long as possible, Davis says in the Jan. 14 article.
For IRAs, required minimum distributions must begin when a certain age is reached. Thus, Davis points out to Steiner, if a trust is used as a beneficiary, its beneficiaries must be people with birthdates that can be used to calculate distributions – not philanthropic organizations, for example.
There may be instances where a trust as beneficiary is a good idea, the article states. But, in general, Davis says it’s a complicated matter and may even result in present-day tax consequences. Although everyone’s situation will be different, alternatives to naming a trust as an IRA beneficiary may include creating separate trusts (or event separate IRAs) for each beneficiary, he adds.
Read the article: Naming a trust as your IRA beneficiary (Bankrate, 1/14/16).