IRA Trust Basics
What are we Covering?
- Revocable or Irrevocable;
- Testamentary or Living;
- Grantor or Non-Grantor;
- Revocable, Living Grantor Trust;
- Signing of the Trust;
- Trustee Authority;
- Signing of Trust-Related Investments; and,
- Trust's Name
IRA Trust Basics
An IRA Trust is not for everyone. There are some situations in which I would tell someone that the Trust may not be the best tool of choice for their IRA to make self-directed investments. In other situations, it is without question the tool of choice for your IRA.
Prior to getting to IRA Trust Basics, I believe that one thing is very important to anyone considering the Trust. Whatever company you may choose to work with, work with a company/individual that not only has the Trust designed and written by an attorney skilled in this arena, but where you will actually be able to visit with the attorney as part of the professional fee and where the attorney will defend the use of the Trust document as an IRS-acceptable document. There may actually be promoters where you never visit with the attorney and just receive the Trust document....that has never made much sense to me.
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Revocable or Irrevocable?
The IRA Trust is "living" but the word "living" is not included in the Titling of the Trust as with some other Trusts.
Testamentary or Living?
This is a Grantor Trust. There is a type of Grantor Trust called an Intentionally Defective Grantor Trust (IDGT), which this Trust is not.
A Revocable, Living Grantor Trust!
In this structure, your IRA is both the Grantor and Beneficiary. You are the Trustee of the Trust, making the investment decisions.
For those of you familiar with the IRA LLC, while different, this picture may provide you a visual comparison. Where in the IRA LLC your IRA is the Member (similar in concept to Grantor for the Trust) and you are the Manager (similar in concept to Trustee for the Trust). Different structures, different terminologies...different products, of course, but it may help you in visualizing the Trust.
Revocable, Living Grantor Trust!
In this structure, your IRA is both the Grantor and Beneficiary. You are the Trustee of the Trust, making the investment decisions.
For those of you familiar with the IRA LLC, while different, this picture may provide you a visual comparison. Where in the IRA LLC your IRA is the Member (similar in concept to Grantor for the Trust) and you are the Manager (similar in concept to Trustee for the Trust). Different structures, different terminologies...different products, of course, but it may help you in visualizing the Trust.
Signing of the Trust?
Your Trust document is signed by both you as the Trustee and your IRA custodian (custodian for the IRA, signing on behalf of the IRA). You do not have the ability to unilaterally change the terms.
Trustee Authority
Defined in the Trust as to the authority the Trustee has...and does not have. You must adhere to the terms of the Trust.
Signing of Trust-Related Investments?
You are the appropriate signer for all Trust activity. When you sign any document for the Trust, you sign as the Trustee (example: John Doe, Trustee).
Trust's Name?
You have some flexibility, but in most cases, the titling of the Trust will be John Doe, John Doe Roth IRA Trust, dated MM/DD/YEAR (example).
This trust is based on the uniform model trust adopted by many States. The governing law for this Trust is that model code. It is highly unlikely that an IRA-Trust will ever be the subject of a lawsuit. If it is, the Trust asks the court to refer to the model code first, then, if that model does not help the legal question at hand, the Trust document asks the court to use the Trust legislation from the State of the Grantor.
PGI works collaboratively with Frank Selden of Frank Selden Law on the establishment of the IRA Trust for our clients. Frank is a University of Washington law school graduate and an ERISA and IRA expert. As an attorney, he will be providing you the PGI IRA Trust document.