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Why name a trust the beneficiary of an IRA

Because of the privacy and flexibility provided by trusts, many New Yorkers make them a central part of their estate planning strategies. By using trusts, people can help to refine their gifts to minors, create certain conditions for passing on property and give significant assets to their heirs without going through probate. Many people also hold significant amounts of money in their individual retirement accounts (IRAs). An account holder can name another person as the beneficiary of the account. Many people may name a spouse or child to receive the remaining funds in the account.

However, it is also possible to name a trust as an IRA's beneficiary. This can give an estate owner a greater level of control over the use of the money in the account and help them to blend the IRA into the whole estate plan. This is especially helpful if one's spouse has already passed away and he or she is considering how to help future generations, some of whom may still be minors. Trusts can also be useful to help support people with special needs or if beneficiaries are dealing with other challenging issues like debt, divorce or addiction.

An estate owner can name a beneficiary of an IRA at the time that they create the account by providing this information to their financial institution. They can also change beneficiary designations later on if they create the trust after the IRA is already established.

This can be a good option for people with significant sums remaining in their IRAs. An estate planning attorney can provide advice and guidance on how to integrate an IRA and other investment or retirement accounts as part of an overall plan.

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