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Ordinarily, you can just name the beneficiary directly.  In some cases however, naming a beneficiary directly could be a recipe for disaster.  For example you could be leaving a well-funded IRA to a minor who will withdraw every penny as soon as they are able ignoring all negative tax consequences.  You could be leaving your IRA to someone is receiving public benefits, immediately disqualifying them from the benefits they are relying upon.  A surviving spouse may remarry potentially resulting in none of the benefits reaching your children.

What alternatives are there?  One alternative is to name a “see through trust” as the beneficiary.  A qualified “see through trust” will allow the beneficiary to “stretch” the IRA distributions out over his or her lifetime, thereby avoiding the tax hit of a forced early withdrawal, and still provide all the benefits of a trust.

Planning who will receive your IRA involves understanding the multitude of tax consequences and the complex rules regarding inherited IRA’s.

Regardless of whether you choose to use a “see through trust” for your family, you should review your IRA beneficiary designations on a regular basis with your financial planner.

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