by Brian J. Hinkle
Designating a primary and contingent beneficiary of your Individual Retirement Account (IRA) is a critical part of your overall estate plan. While most married account owners name their spouse or children as primary and/or contingent beneficiaries of their IRA, other beneficial options exist.
Most notably, naming a trust as an IRA beneficiary can be an effective estate planning strategy, especially when the capacity or maturity of beneficiaries is a concern. When a trust meets certain requirements, the IRS will "look through" the trust and treat trust beneficiaries as if they were named directly as the IRA beneficiary. By doing so, the trust can take advantage of beneficial minimum distribution rules. The trust also provides an additional layer of creditor protection to the beneficiary or beneficiaries than what would be provided if the accounts were left directly to the beneficiaries.
Because of the complexity involved, account owners should meet with their legal and financial advisors annually to review their IRA and other beneficiary designations to ensure that they meet their overall planning goals.