Should I put my IRA into my Trust?

One of my clients inquired about his IRA:  Do I put the IRA in the Trust like my other investments?

Not a good idea.

Money in your IRA isn’t taxed while it stays in an IRA account. Under Internal Revenue Service rules, only an individual can own an IRA.  Since trusts, are created and exist to own things on behalf of a beneficiary, all of those things, owned by the trust are taxable.

If you move your IRA into a trust it is considered a taxable distribution to the Trust.  That means all of the money in the IRA is immediately taxable as ordinary income.  Moreover, the tax deferred status of any future earnings is lost.

So he decided to name his trust as the beneficiary of his IRA thus bearing none of the unfavorable tax implications.  The trust has to make required minimum distributions from the IRA, and those are taxable to the same extent as they would be whether there was a trust or not.

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