Living Trust Beneficiary for Real Estate IRA

Living Trust Beneficiary for Real Estate IRA

Architect · Portland, OR · Member since 2012 · 10 posts · 0 votes

Hi - I'm transferring assets into and changing the beneficiary of various other assets into a Revocable Living Trust. Divorced with 2 smallish kids at the moment and the idea is to have the Beneficiary Trustee manage the trust in the best interests of the kids. A bit complex, but pretty smooth sailing (done online with a great service) except when I get to my Self-Directed IRA, a checkbook LLC with just one rental property, which is itself an "inherited IRA" so it has its own subset of rules (!). Especially with the passage of the Secure Act which further complicates things. So...2 questions:

1) Anyone have recent experience with something like this?  Ideally, it would pass into the Trust (upon my demise or incapacitation), whereupon the Trustee would manage it, even if subject to the 5 or 10 year rule.  But it's very unclear how to do this and whether there's a better way (set up a different type of Trust for this asset).

2) In the event I'm stumped or worried I don't have it right, anyone have an Oregon estate planner/attorney who might specialize in the IRA world?

Thanks!   John

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  • Brian EastmanPro Member
    Self Directed IRA & 401k Advisor · Wenatchee, WA · Member since 2014 · 2k+ posts · 2k+ votes
    5y

    @John Cava

    Speaking with an estate planner would be a good idea, but with respect to the IRA it is actually pretty simple.

    The LLC is simply an investment of the IRA. The beneficiary designation happens at the level of the IRA itself and is no different than any other IRA. If you want to name the trust as a beneficiary, contact your IRA custodian for the appropriate form.

    With respect to the LLC, you will want to consider who would administer the LLC and wind things down on behalf of the trust beneficiary. This would likely be the same person who will administer the trust itself, but may not be.

    If something were to happen to you and the trust is named as beneficiary to the IRA, it would not be difficult for the trustee to gain control over the LLC as a manager. They can communicate with the IRA custodian to obtain management authority for the LLC in short order. You could, however, smooth that process by drafting a resolution of the LLC designating a successor manager in the event of your incapacitation or death. That resolution and a death certificate would immediately get them signing authority for the LLC.

    Lastly, good estate planning for an IRA owned LLC involves making sure whoever will be stepping in as successor manager can easily find the documents they need to take control of the entity. You also need to produce and maintain good documentation surrounding the financial accounts and investment holdings of the LLC. Unlike a conventional IRA where everything is publicly traded and easily identified, the holdings of the LLC are only known to you.

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