If you name a trust as the beneficiary of your IRA, you can have a say in how your IRA will be used after your death. Suppose George Thomas has a $1 million in his IRA. George is several years older than his wife Paula so he expects her to be the surviving spouse. George would like Paula to be able to use the money in his IRA, after his death, and he would their children to get what’s left after Paula dies.
However, George knows that Paula has a brother who is always asking for money. His $1 million IRA might not last very long if Paula inherits and agrees to her brother’s requests.
Therefore, George decides to name a trust as the beneficiary of his IRA. Paula is the beneficiary of this trust. George also names his attorney as trustee of the trust. He instructs the trustee to distribute enough of the IRA to allow Paula to live comfortably but also to avoid imprudent distributions. With this arrangement, George provides Paula with funds she might need and increases the chances that some of the IRA will pass to their children.