Do You Ever Put IRAs Into a Revocable Trust?

It requires expertise to combine IRAs and trusts.

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The Internal Revenue Service enforces highly detailed rules regarding the ownership and inheritance of an individual retirement account. Run afoul of these rules, and you might not like the results. The rules don’t allow you to bequeath your IRA to a revocable trust unless the trust becomes irrevocable before or upon your death.

Revocable Trust

You can change the terms of a revocable trust. This allows the trust owner to reclaim assets assigned to the trust and to change beneficiaries. However, you can’t move an IRA into any trust since this requires you to make the trust the IRA owner. The IRS only allows you to designate a new IRA owner as part of a divorce settlement. Estate-planning lawyer Natalie Choate advises that transferring assets to a trust would always cause immediate taxation. The IRS treats this as a distribution of the assets, and you’ll owe taxes based on the assets’ values. You also might have to pay an additional 10 percent penalty if you are younger than 59 1/2.

Trust as Beneficiary

You can make a trust as the beneficiary of your IRA, but it must be an irrevocable trust. It must also clearly list the beneficiaries of the trust, which will become the beneficiaries of your IRA. If you name a revocable trust or any entity other than an individual as your IRA beneficiary, the trustee will not be able to determine the “designated beneficiary,” which is the oldest living beneficiary on September 30 of the year following that of the owner’s death. Without a designated beneficiary, the trustee must distribute the IRA using rules based on the final age of the IRA owner.

Distribution Rules

If the trustee cannot determine the designated beneficiary, she must determine whether the deceased lived until the required beginning date for minimum distributions. This date is normally April 15 of the year following the one in which the owner reaches age 70 1/2. If the owner lived until this date, the trustee must distribute the IRA based on the life expectancy of the owner as of his birthday in the year he died. If the owner died before this date, the trustee must distribute the IRA no later than the end of the fifth year following the year of the owner’s death.


You can set up a revocable trust to become irrevocable upon your death. If it also meets the other requirements for IRA trust beneficiaries, then the trustee can see through the trust to determine the designated beneficiary. If the owner died before reaching the required beginning date, the trustee uses the life expectancy of the designated beneficiary to determine the distribution period of the IRA. If a spouse is an IRA beneficiary, she can roll the assets into her own IRA, which means she won’t have to take required distributions until she reaches age 70 1/2. Any beneficiary can request IRA distribution according to the five-year rule, but a trust might require the trustee to distribute only the minimum amounts each year.