IRA Conduit Trust

[LadyInTheRed]

after looking at all this stuff, a conduit trust sounds great. since a conduit trust, which is a trust that simply receives the distributions from the IRA and then passes the income out to the beneficiaries, can't it simply just say that??? just with the heading and
then the instuction? i would think that would work?

The conduit trust provisions require the creation of a separate trust to administer each beneficiary's share of the IRA so that (1) the IRA can be separate from any assets distributable to any beneficiaries that are not individuals and (2) the distributions can be stretched over each beneficiary's lifetime instead of all beneficiaries having to use the oldest beneficiary's life expectancy.

[LadyInTheRed]

Oh, there is another point I forgot to make. If a trust is a beneficiary and the only beneficiaries are individuals (i.e., there are no charitable organizations listed as beneficiaries), the IRA can be stretched out based on the life expectancy of the oldest beneficiary, even without the conduit provisions. So, if the beneficiaries are all individuals and close in age, the conduit trust may not be worth the trouble.

Also, a clarrification. If the individuals are beneficiaries of the IRA, the IRA would have to be divided after your death in order for each beneficiary to use his/her own life expectancy. If the IRA is not divided, the distributions would be based on the life expectancy of the oldest beneficiary.

The first link I provided explains the issues well.

[LadyInTheRed]

Thanks, LITR. I will check out these links.

I want a Conduit Trust so the kids have access (if needed) but so they can also stretch out the required minimum distributions based on their life expectancy at the time of inheritance. None of the other options (that I'm aware of) do that.

Losing the ability stretch out the payments is only an issue if a trust is the beneficiary of the IRA, in which case you need the conduit trust provisions. If you make the individuls the beneficiaries of the IRA, they can stretch out the payments. We usually recommend people not make their trust the primary beneficiary of an IRA unless the beneficiaries are minors, can't be trusted to manage their money or need creditor protection.

Hopefully they won't be inheriting it at all and I will spend it down in my 80's on international travel and wild parties.

LOL! When my mom talks about being careful with her money so there is something left for my sisters and me, I always tell her that she should go travel and spend her money enjoying retired life instead of worrying about what she leaves for us.

[tobee43]

Thanks, LITR. I will check out these links.

I want a Conduit Trust so the kids have access (if needed) but so they can also stretch out the required minimum distributions based on their life expectancy at the time of inheritance. None of the other options (that I'm aware of) do that.

Hopefully they won't be inheriting it at all and I will spend it down in my 80's on international travel and wild parties.

kudo's to you for doing this yourself. i have being going back and fro to calif. had to work on a spinging trust and pulled about 50 years forward...what a MESS.

after looking at all this stuff, a conduit trust sounds great. since a conduit trust, which is a trust that simply receives the distributions from the IRA and then passes the income out to the beneficiaries, can't it simply just say that??? just with the heading and then the instuction? i would think that would work?

[debee]

Thanks, LITR. I will check out these links.

I want a Conduit Trust so the kids have access (if needed) but so they can also stretch out the required minimum distributions based on their life expectancy at the time of inheritance. None of the other options (that I'm aware of) do that.

Hopefully they won't be inheriting it at all and I will spend it down in my 80's on international travel and wild parties.

[LadyInTheRed]

I found some links that I think will help you. The first two links have sample language you can add to the trust in the Nolo book. I don't know anything about the authors, but the language is similar to what the attorneys I work with use. The third link is an article by Natalie Choate who is a well respect expert on estate planning for retirement benefits.

http://dev.greensfelder.com/publicDocs/DOCS-906474-v1-Final_MOBar_retmnt_article.pdf

http://www.texastaxsection.org/LinkClick.aspx?fileticket=Mri8wfi22HI%3D&tabid=80

http://www.uchastings.edu/faculty-administration/faculty/adjuncts/class-websites/maring/Maring-Class7-ConduitTrust.pdf

I can't tell you whether these forms are sufficient. Read the information regarding IRS requirements and make sure you are comfortable that whatever you use is sufficient.

The Nolo book is good resource. The attorneys I work with recommend it to people who call and have simple estates that don't justify the upscale fees our firm charges. But, people run into problems when they start revising the forms in the book. Don't delete anything from the forms unless you understand the purpose of what you are deleting and make sure no other portions of the trust refer to the section you delete. When you add provisions to the Nolo forms, make sure they don't contradict other terms of the trust. When you are done, read the trust very carefully to make sure everything fits together and makes sense.

Debee, I believe you have minor children. Once they are adults, if you aren't concerned about them being able to have direct access to the IRA, you should consider making them the beneficiaries of the IRA, instead of the trust.

An option to a conduit trust is to roll your IRA to a trusted IRA. I don't know much about trusted IRAs and it may be an expensive option. If you are interested, contact the institution where your IRA is held and ask if they offer them.

[debee]

I need to set up a conduit trust for my IRA. I know, I know - hire a lawyer. Nolo has a great book for setting up living trusts, but I've yet to find something comparable for pass-through trusts. Anyone know of any good resources?