Conduit Trust as IRA beneficiary

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Conduit Trust as IRA beneficiary

Postby Buckeye78 » Mon Apr 11, 2011 4:50 pm

Has anybody actually set up a conduit trust to be the beneficiary of their IRA?
If so, how did you research whether the estate planning attorney was qualified and experienced enough to draft it?
Any other thoughts about the trust in general? Thanks
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Postby Leesbro63 » Mon Apr 11, 2011 6:12 pm

I listen to Jim Lange, an IRA specialist and he advises against this except for very special circumstances:

http://www.retiresecure.com/story.php?page=3
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Postby Buckeye78 » Mon Apr 11, 2011 9:25 pm

thanks
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Postby sscritic » Mon Apr 11, 2011 9:43 pm

Which of the 49 one-hour shows has the answer?
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Postby Leesbro63 » Tue Apr 12, 2011 2:42 am

I don't remember!
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Re: Conduit Trust as IRA beneficiary

Postby sportal » Fri Jan 25, 2013 11:59 pm

This topic came up in my search, so I thought I would share the specific show that was referenced by Leesbro63.
Episode #32

Specifically they say that you may not want to do a conduit trust for a perfectly responsible adult child who might not need it's protections (creditor problems, etc).

FYI, here was the google search term that filtered all the transcripts to allow me to find the episode quickly. Thanks google.
site:www.rothira-advisor.com conduit trust -pdf
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Re: Conduit Trust as IRA beneficiary

Postby bsteiner » Sat Jan 26, 2013 6:03 pm

The reason the conduit trust rarely makes sense is that it requires that the trust pay out all of the IRA distributions. If the beneficiary lives to life expectancy, which will happen 50% of the time, nothing will be left in the trust. All of the assets will be thrown into the beneficiary's estate for estate tax purposes, and will be exposed to the beneficiary's creditors, including spouses. It's almost always better to give the trustees discretion over distributions. That way, the trustees can distribute, or not distribute, whatever amount they deem appropriate from time to time.

For more on this, see my article on this subject in the March 2004 issue of BNA Tax Management's Estates, Gifts & Trusts Journal: http://www.kkwc.com/docs/AR20041209132954.pdf .

In response to Leesbro63: thanks for posting the link to Jim Lange's radio show broadcasts. I'm honored to be alongside Jack Bogle. I was the guest on 44 and 76, and John Bogle was the guest on 89.
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Re: Conduit Trust as IRA beneficiary

Postby Leesbro63 » Mon Jan 28, 2013 6:02 pm

Bsteiner: I live here in Pittsburgh and while I don't use Jim Langue, I would recommend him to someone who needs his services. His podcasts are very informative. I just went back and listened to your podcast of early 2011, just after the Bush Tax Cuts were extended for two years. It was an excellent podcast! There was a lot of time spent speculating what could or would happen at the end of 2012. Now that this drama has passed, it would be interesting to hear you and Jim Langue again discuss estate planning in light of a more settled estate tax law.
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