I am often asked, “How do I put my IRA into my living trust?” Someone who has just created a trust usually asks this. The answer is: you don’t. The law is very clear that it must remain in the name of the person who earned it.
If the IRA can’t be owned by the trust, does that mean the IRA must go through probate? Not if you fill out the beneficiary form correctly. By naming individuals (such as your spouse and children) or in some cases your trust, as the beneficiary of your IRA, it will avoid probate.
In most cases, people usually name individuals as the beneficiaries of their IRA. This transfers the money upon your death in the most efficient manner. The beneficiary or beneficiaries just need a death certificate to claim the IRA.
For example, my wife is the primary beneficiary of my IRA and my sons are the contingent beneficiaries. This means when I pass away, my wife will inherit my money. If she passes before I do, my sons will inherit my IRA upon my death.
When would you name the trust as the beneficiary? If you have circumstances where the money needs to be controlled, you should name the trust as beneficiary. For example, if you have children who can’t manage money, your trust can provide a monthly income for your kids.
Anything with a beneficiary statement will pass to the beneficiaries listed. This includes life insurance, 401(k)s, annuities, and other types of accounts.