Naming Trust as Beneficiary of IRA and NQ Annuity

[New York Enrolled Agent]

Widowed elderly customer has a garden variety revocable trust with no special provisions - had it created simply for probate avoidance.
She has asked about having the trust be the beneficiary of her IRA and NQ Annuity. Her children are currently named as her benes.
I have advised her to consult with her attorney on this. Can anyone comment on possible tax downsides to this type of bene arrangement ?
Thanks.

It seems to me you have not told us what (at least to me) is the most important question to ask the client. Why do you want to do this?

[Rapid Robert]

Here are the few key points.. I have some CE material from Spidell (tax research and CE provider) that has several pages with all the details if I need to know more.

• If the trust is the IRA beneficiary, then you want all the trust benes to be considered "designated beneficiaries" so that the rules for required distributions that apply to individuals will apply to the trust
• Before changes in the SECURE Act, this was a good way to control distribution of funds after death, for example if a beneficiary is very young and you don't want them to have access to a large lump sum until they are older and presumably more mature. Now, with the ten year max distribution rule, this doesn't help in nearly as many situations as before.
• IRA distributions to the trust will be taxed as ordinary income at relatively high trust tax rates unless timely distributed.
• Having the trust own the IRA helps protect it from creditors of the benes and maintain it as separate property if married.

I don't know about how any of this applies to annuities.

[RWG1950]

Widowed elderly customer has a garden variety revocable trust with no special provisions - had it created simply for probate avoidance.
She has asked about having the trust be the beneficiary of her IRA and NQ Annuity. Her children are currently named as her benes.
I have advised her to consult with her attorney on this. Can anyone comment on possible tax downsides to this type of bene arrangement ?
Thanks.