IRA Beneficiary
20. Trust Flowchart
As shown here, you set up a trust and name the trust as the beneficiary of your IRA or tax-deferred plan. Then, you name your spouse, children, even your grandchildren as beneficiaries of the trust.
While you are living, the distributions from the tax-deferred account are paid to you based on your life expectancy. Then, after you die, the distributions will be paid to the trust, based on the life expectancy of the oldest beneficiary of the trust.
When you set up the trust, you provide instructions for how this money is to be used. For example, your trust could provide income to your spouse for as long as he or she lives. Then, after your spouse dies, the income could go to someone else. The trust could even provide periodic income to your children or grandchildren, keeping the rest safe from irresponsible spending, creditors and spouses.
The trustee of the trust can withdraw more money from your tax-deferred account if needed to follow your instructions - just as you can while you are living - but the rest can stay in the account and continue to grow tax-deferred. You can name anyone you wish as trustee, but some people name a bank or trust company, especially if the trust will exist for a long period of time - for example, if your grandchildren are beneficiaries of the trust.