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Do’s and don’ts on leaving a trust as a beneficiary for an IRA

When it comes to estate planning, some Florida residents are like ostriches and bury their head in an attempt not to think about it. However, there is one estate planning technique that must not be ignored or considered lightly. It must be carefully thought out and the benefits weighed against the disadvantages. This procedure is leaving a trust plan as the beneficiary of an individual’s IRA account. So here are some basic do’s and don’ts about this controversial estate planning technique.

One of the first questions someone needs to ask about leaving a trust as the beneficiary of an IRA is that there must be a good reason for leaving the IRA benefits to the trust plan. Some good reasons include using the trust in order to help beneficiaries who may not be particularly trustworthy. In cases like this, using the trust can help those individuals who may not be able to trust themselves. Another good reason for using this tactic is if the testator wants to leave money for their spouse and then have any remaining assets go to their children after the spouse has passed away.

It’s also very important for the testator to make sure to have the right financial advisor draw up the documents. Most financial experts agree that leaving a trust fund as the beneficiary of an IRA can become complicated. The advisor who is creating the trust should be very comfortable with the terminology regarding inherited IRAs. Improperly setting up a trust to an IRA can cost the testator dearly.

Experts say that it’s also very important to make sure that the beneficiary of the trust is a person and not an organization. However, any Florida resident who wants to explore the possibility of setting up trusts as the beneficiary of their IRA may want to speak to an estate planning attorney in order to find out if this method of estate planning is right for them.

Source: bankrate.com, “Naming a trust as your IRA beneficiary,” Accessed April 10, 2016

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