How to Transfer an IRA Into a Trust

by Eric Bank, studioD Google

An individual retirement account is set up for the benefit of its owner and beneficiaries. An IRA owner can’t transfer title to another party, except as part of a divorce settlement. Attempting to transfer an IRA to a trust would result in its immediate distribution. However, you can name a trust as your IRA’s beneficiary.


A trust is a legal arrangement that allows a trustee to hold assets for the benefit of beneficiaries. The trust grantor can set rules that govern how the assets are distributed. The Internal Revenue Service requires that a trust named as an IRA beneficiary meet certain requirements. The trust must be valid under state law, irrevocable upon the death of the owner and explicitly name its beneficiaries. The trustee must receive a verified copy of the trust, including any changes. A trust that fails these tests is tainted, resulting in the accelerated distribution of assets.

Conduit Trust

A properly drawn “conduit trust” names the IRA beneficiaries in the trust instrument. A trustee can rely on a conduit trust to identify the primary and contingent beneficiaries. On Oct. 31 of the year following the IRA owner’s death, the trustee identifies who inherits the undistributed portion of the IRA. Also on this date, the trustee determines how quickly to distribute the IRA assets. To do so, the trustee must identify the “designated beneficiary” and the final age of the owner.

Designated Beneficiary

The trust's designated beneficiary is the oldest living one as of the Oct. 31 decision date. Any beneficiaries who die, disclaim their share or take a lump sum distribution before this date cannot be the designated beneficiary. If the trust is not properly drawn or if any of the beneficiaries is not an individual, the trustee can’t name a designated beneficiary. In this case, the trustee must distribute all IRA assets by the end of the fifth year following the year of the owner’s death, unless the owner died after the required beginning date for minimum distributions. If so, the trustee distributes the assets based on the owner’s life expectancy as of his birthday in the year of his death.

Minimum Required Distributions

An owner of a traditional IRA must begin taking minimum distributions by April 1 of the year after the one in which he reaches age 70 1/2. If he dies on or after this date, the trustee compares the life expectancy of the designated beneficiary with that of the deceased and uses the longer to figure the period for required distributions. For example, if the designated beneficiary has a life expectancy of 20 years compared to seven years for the owner, the trustee will distribute the IRA assets over a 20-year period. If the owner died before reaching the required beginning date, the trustee uses the designated beneficiary’s life expectancy. Any beneficiary can request a five-year or lump-sum payout.

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About the Author

Based in Chicago, Eric Bank has been writing business-related articles since 1985, and science articles since 2010. His articles have appeared in "PC Magazine" and on numerous websites. He holds a B.S. in biology and an M.B.A. from New York University. He also holds an M.S. in finance from DePaul University.

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