Can an IRA Be in a Trust?

Many people wonder if an Individual Retirement Account (IRA) can be placed in a trust when it comes to estate planning and retirement savings. While trusts are commonly used to manage and distribute assets, the rules around IRAs and trusts are unique.

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Can a Trust Own an IRA?

The simple answer is no—an IRA must be owned by an individual during their lifetime. Unlike other investment accounts, IRAs have specific tax rules that require ownership by a person, meaning they cannot be directly placed into a trust while the account holder is alive.

However, a trust can be named as the beneficiary of an IRA, which means the trust would receive the IRA funds after the account holder’s passing. This can be a way to manage how retirement assets are distributed to heirs.

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Why Name a Trust as an IRA Beneficiary?

Naming a trust as the beneficiary of an IRA can provide control over how the assets are distributed, which can be particularly useful in situations where:

• You want to protect beneficiaries from mismanaging the funds.
• You have minor children or heirs with special needs.
• You wish to prevent creditors or divorcing spouses from accessing the inherited IRA funds.
• You have a complex estate plan that requires structured distributions over time.

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Alternative Strategies

If you're considering estate planning options that involve your IRA, here are a few alternatives:

• Spousal Rollovers If a spouse is the beneficiary, they can rollover the IRA into their own name, preserving tax advantages.
• Naming Individual Beneficiaries — In some instances, naming individuals as IRA beneficiaries instead of a trust can allow for longer tax-deferred growth.

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Conclusion

While a trust cannot own an IRA during the account holder’s lifetime, it can be named as the IRA’s beneficiary, offering structured control over distributions. However, due to recent changes in inheritance laws, doing so can have significant tax implications.

Before making any decisions, it's crucial to consult with a financial planner or CPA to ensure that your estate and retirement planning align with your financial goals. Proper planning can help maximize the benefits of your IRA while ensuring your assets are distributed according to your wishes.