4000 - Advisory Opinions
Whether an IRA May Be Retitled in Name of Revocable Trust and Whether a Revocable Trust May Be Named as Beneficiary of an IRA
I am writing in response to your letter of July 2, 1990, which was forwarded to the Legal Division by the FDIC's Office of Consumer Affairs. I regret that we have taken so long to respond to your inquiry, but we have been receiving so many letters on deposit insurance coverage that we have not been able to respond to them as quickly as we would like.
In your letter, you ask how to list your Individual Retirement Accounts ("IRAs") as part of your revocable living trust. You note that many of your banks agree to list your certificates of deposits ("CDs") as part of your revocable trust, but refuse to do so for your IRAs. You also mention the banks' reluctance to "designate the beneficiary designation on our accounts as listed in the living trust document," by which I understand you to mean that the banks are refusing to list your revocable trust as the beneficiary of your various IRAs. You add that one bank has agreed to list the IRA owner's estate as the beneficiary of his IRA, but in this case you wonder whether such an IRA account would be insured as if it were a revocable trust (it would not be).
First, I should warn you that it is by no means clear that you can simply retitle your IRA (and perhaps your wife's IRA) with the name of your revocable trust. This question is really a matter for the Internal Revenue Service to decide (since the IRA is its creation), and you should get in touch with them before proceeding any further. For instance, trying to make your IRAs one of the assets of your revocable trust may mean that the IRAs cease to be qualified plans under section 408 of the Internal Revenue Code, and thus, that you would forfeit the IRAs' tax advantages. In any case, you should communicate with the Internal Revenue Service on this issue. Then, once you have received their answer, we will let you know how the resulting account (or accounts) would be insured.
The same advice holds true for whether the Internal Revenue Service would permit you to name your revocable trust as the beneficiary of your IRA. The Internal Revenue Service's regulations state that one of the permissible beneficiaries of a given individual's IRA is the estate of that individual; however, there is no mention of that individual's revocable trust as a permissible beneficiary for his IRA. 26 C.F.R. § 1.408-2(b)(8) (1990). Thus, you should ask the Internal Revenue Service whether it would permit you to name your trust as the beneficiary of your IRA, and, if so, whether naming such a beneficiary would disqualify you from receiving any of the IRA's usual tax advantages.
I hope that this information will prove useful to you. If I can be of any further help, I can be reached at (202)-898-3859.