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hey paul rabalay here estate plundering attorney and in this video we're going to talk about how naming an irrevocable trust as a beneficiary of an ira really isn't irrevocable all right so let me give you a background some background so for many in america their ira their individual retirement account their traditional ira is their single largest financial asset and it's the reason it is their single largest financial asset is because while they were working for the company they were sucking away money and the company may have been matching it in a 401k and then when that person retired they rolled that 401k over to an in over two in a traditional ira and that's their single largest financial asset many people have iras that are worthwhile in excess of a million dollars doesn't really matter what the value is for purposes of this video but nonetheless most people name adult individuals as the beneficiaries of their ira you know it's common for a married person to name their spouse as their primary beneficiary and again by the time their ira is large they've probably retired they've rolled it over to an ira so they their children are probably adults at that point so most people name their spouse as their primary beneficiary name their adult children as their contingent beneficiaries that's very common and in many cases that's appropriate but some ira owners wish to name a trust as a beneficiary let me give you a couple examples let's say husband is in his second marriage he has children from his first marriage and he's not comfortable naming his wife as the beneficiary of his ira because if he dies and his wife is the 100 percent primary beneficiary and that ira all goes to her she can leave that to whoever she wants to when she dies his kids are left out in the cold so sometimes that husband for example may want to name a trust as the beneficiary of his ira so generally speaking after he dies those ira funds are available to his wife for her needs but when she dies because a trust was named as the beneficiary any remaining trust assets when his surviving wife dies revert back kind of automatically to his children so that's a common reason why some people name a trust as a beneficiary some people who aren't married or some people who are they want to name either you know minor children or minor grandchildren as beneficiaries and so naming a trust is appropriate there and then sometimes you know parents have one or more children where a trust is necessary to for that child to be the beneficiary maybe the child has you know drug or alcohol addiction issues maybe the child has financial irresponsibility issues maybe the child has special needs and it's just not appropriate to enable that child to inherit an ira take it all out pay all the income tax in one big lump sum and then go spend the money some parents just don't want to give their children or grandchildren that opportunity to blow it so naming a trust as a beneficiary of a traditional ira can have some pretty significant adverse income tax consequences ideally you want up to allow for the more favorable deferred income tax treatment that's allowed when individuals are designated as beneficiaries just generally the the required taxable distributions are delayed longer when individuals are named as beneficiaries instead of trust but but congress said that if you designate a trust as a beneficiary of an ira and it qualifies as a see-through trust then you can when the ira introduce when the ira owner dies you can look through the trust to the underlying trust beneficiaries and those required minimum distribution rules will apply as if those trust beneficiaries were actually named as individual beneficiaries even though a trust was named as the beneficiary okay let me give an example husband just like i said before husband named names a trust for his wife and his children as a beneficiary and let's say and i'm gonna go through this in a minute but let's say just for purposes of our discussion that trust does not meet the requirements or or the four requirements of what's called a see-through trust depending upon when the ira owner dies there there may be a uh five-year payout requirement after that husband-slash-ira owner dies uh you know they they don't get to take advantage of of that income tax deferral but if the trust does qualify for this see-through treatment then distributions after the husband ira owner dies can be based on his surviving wife's life expectancy now i realized that the the you know fairly new now secure act which took effect january 1st 2020 does limit the income tax deferral options for for most non-spouse beneficiaries but you still want to get that see-through tax treatment when you name a trust as a beneficiary and to get this see-through tax treatment four requirements of the trust must be met one of those requirements is that the trust generally be irrevocable so sometimes we name an irrevocable trust as a beneficiary of an ira but then the first thought that comes to people's mind when they see that or hear that that's what they need to do they're like what i don't want to name an irrevocable trust as a beneficiary of my ira what if i change my mind and you know want to change that in the future this whole thing's irrevocable i don't want to do that so that's where all the confusion sets in so if years later an ira owner who had designated an irrevocable trust as a beneficiary are they stuck years later if they if their family circumstances change that weren't changing the beneficiary of their ira they're not stuck at all one bit because even though an ira owner names an irrevocable trust as a beneficiary and he did that so the beneficiaries of the trust can get the favorable deferred see-through tax treatment at any time an ira owner can change his or her beneficiaries in other words just because you name an irrevocable trust as a beneficiary it doesn't mean you can't change your beneficiary so it's it's is necessary so if it's necessary to name a trust as a beneficiary of your ira you want to ensure that it qualifies as a see-through trust to get the favorable deferred income tax treatment to qualify among other things that trust must be irrevocable but just because you name an irrevocable trust as a beneficiary you can still remove that trust as a beneficiary and then name another trust or an individual or individuals as the beneficiary of your ira just by simply completing a change of beneficiary designation form so you you're not locked into anything by naming an irrevocable trust as a as a beneficiary of your ira so the bottom line here is there's a difference between naming an irrevocable trust as a beneficiary of your ira there's a difference between that and an irrevocable beneficiary designation an irrevocable beneficiary designation which on an ira we never see that's something that can't be changed but but uh virtually all ira owners can change their beneficiaries anytime they want to and so they can change it from irrevocable trust number one to individual individuals a and b or to irrevocable trust number two bottom line here is you're not locked into anything if your circumstances weren't naming a trust as a beneficiary and income tax rules warrant naming a trust as a beneficiary if your circumstances change in the future you can redo all of this rename beneficiaries don't let that word irrevocable trust as a beneficiary scare you into thinking that you can't change your beneficiaries okay this is about as hairy and complicated as it gets you know all the these darn tax regulations require us to have make videos like this but but they are important and so you're going to want to make sure that you turn the gray like button into a blue like button blue is just much better and plus it tells youtube hey show paul's videos to more people and then if you haven't already hit the subscribe button and the notification bell that you way you won't miss anything as i make more of these estate planning educational videos in the future we will see you next time