Designating a Trust as the Beneficiary of an IRA in the Age of the SECURE ACT

The SECURE Act (remember that) has been around for one year now. To commemorate its first birthday, Brent and Rachel look back at the SECURE Act and how it has changed the landscape for designating a trust as a beneficiary on an IRA. Brent and Rachel have already written about this issue before here and have touched upon this topic in an earlier podcast episode here. But in this week’s episode, they take a deeper dive into which trusts may be the best IRA beneficiaries and how you go about doing it. They specifically look at the Secure Stretch Trust, Charitable Remainder Trusts, the Qualified Subchapter S Trust, and the Beneficiary Defective Trust.

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2 comments

  1. Very timely pod cast, I am currently looking at the structure of ESOP plan where one of the options are to elect to transfer to IRA. The problem with this is that the unrealized appreciation (paper gains) would not be recognized as such and taxed as ordinary income when withdrawn from the IRA. Is there an alternative where a ‘trust’ could receive the ESOP and allow the trustee to distribute the assets as Capital Gains based on the cost base of the shares.

    1. Ron, sorry I’m very slow to respond to this (I should check comments more frequently). I’m not aware of any special ESOP rule that would be different from the defined contribution rules that we discussed on the podcast. It’d be fun to learn I’m wrong about that, but I have never come across anything like that.

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