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With increasing wealth being held in Individual Retirement Accounts (IRAs), people are seeking more options to transfer their IRAs upon their death. An important consideration is that, by minimizing required distributions, "inherited IRAs" can continue to grow, tax-free, following the death of the IRA plan participant. One option that is now being more frequently used is the naming of a trust as IRA beneficiary. This gives the plan participant increased flexibility and control over how distributions are paid from the IRA following his or her death.
To understand how a trust can be used as a beneficiary, the starting point is the minimum distribution rules ([ss]401[a]). Although an IRA plan participant may begin taking distributions at age 59, distributions are not mandatory until the plan participant reaches age 70 which is the "required beginning date" or RBD.
At the RBD, …