There are reasons you might create a trust to act as your IRA beneficiary. If, for example, you think you might pass away while you have minor children or other dependents who cannot be expected to handle money appropriately, having IRA funds deposited into a trust might be a good idea. But there are some specifics to consider when creating such a legal relationship.
The point of an IRA is to defer taxes on income as long as possible, and you only maintain the tax benefits if the beneficiary of the IRA is an actual person. You can make a trust the primary beneficiary of the IRA as long as the trust itself has a beneficiary that is a person. This is because IRA disbursements are calculated based on the expected lifetime of a beneficiary. A trust that benefits a business, organization or charity will not work for this purpose.
Make sure you are leaving an IRA to a trust for the right reasons and that you are doing it in the right way. Because an IRA trust has different moving parts than some other trusts, mistakes can cost big down the road. Work with a professional who has experience in setting up such trusts to ensure all details are attended to properly.
When dealing with multiple beneficiaries, consider the idea of multiple trusts. You can distribute assets among several trusts, reducing the chance that your beneficiaries will argue over assets in the future. You can also consider dividing an IRA into multiple IRAs to be distributed to multiple beneficiaries. This can make the process easier for everyone down the road, though it will take some work for you now.
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