Sometimes there are good reasons to name a trust rather than an individual as a beneficiary of your IRA. Maybe you have a child who you fear will spend the money they inherit wastefully, or maybe you have a special needs heir and a direct inheritance would affect their qualifications for aid, maybe there is a second spouse you wish to provide for but children from a first marriage you want to protect also.

All of these goals can be achieved and the "stretch out" provisions of IRA rules preserved if you do some careful planning.

IRS rules only allow individuals to inherit IRAs without triggering immediate taxation. However if you structure a trust as a "see through" trust you can exert some control without losing the tax benefits of a "stretch IRA". To qualify as "see through" the trust must:

• The trust must be valid under state law;
• The trust must be irrevocable or become irrevocable at the death of the grantor;
• The trust beneficiaries must be identifiable individuals
  
• Documentation must be provided to the custodian of the IRA by Oct. 31 of the year after the owner dies
  

The trust must pay out the IRA's required minimum distributions to the beneficiaries or be subject to taxes at the trust level which reach the maximum tax rate (35%) with only $10,000 of income. The trust must base the RMD on the age of the oldest beneficiary so if there is a large difference in the ages of your desired beneficiaries you may want to consider splitting the IRA to allow a lower RMD for younger beneficiaries.

Having a trust as the beneficiary of your IRA can provide many benefits, but the price of making a mistake is high, so be sure to consult with a qualified legal and tax advisor before choosing this option.

Corporate trust services are offered by trust companies, banks, some attorneys, and some financial advisors.

Your first step should be to determine just what services you expect to receive from the trustee. You can choose a trustee to perform the administrative functions only. This could include:

• Administration of the trust in accordance with the trust agreement.
• Accounting and reporting of income, expenses, and capital gains and losses.
• Distribution of income and/or principal to beneficiaries as determined by the trust.
• Annual administrative account reviews
• Issuance of broad fiduciary guidelines
• Filing of annual trust income tax returns.
• Providing custodial services and executing transactions.

Using only administrative trust services the beneficiaries or a trusted financial advisor could be entrusted with managing the assets of the trust. You can also hire a trustee to provide both the administrative and asset management functions.

When you have determined exactly what services you want the trustee to provide you can move to the next phase which is where you should request proposals from several sources. If possible you should meet face to face with a trust officer from each firm you interview. While very intangible the personal touch is a large part of the function of corporate trustees.

Some of the questions you will want to ask include:

• What account minimums does the trustee require?
• How long have they been in the trust business?
• How many trusts do they manage and what is the average size of their trust accounts?
• What level of experience does the staff have and how did they acquire that experience?
• What is the staff turnover?
  
• Do they have an open architecture or are they limited to proprietary in house investment options?
• What conflict of interest might the have?
  

Of course you will also want to compare investment performance and fees along with the services provided. Location is also a consideration. Will they be accessible to your heirs? And finally, be sure they are really in the trust business, not just going through the motions so they can advertise that they offer trust services.

The responsibilities of a trustee are often complex and time consuming. Managing trust assets often entails familiarity with tax law, real estate markets, security markets, and financial planning. Often it is the oldest or most responsible heir who is given this duty. Here are some things you should consider before deciding on a trustee.

1. Do you trust this individual? The trustee will need to put your wishes and vision of fairness above any of their own. You must have absolute trust in their integrity.
   
2. Is the person willing? You should be sure they have the time to devote to all the many details that can and surely will arise in performing the duties of trustee. If it would be a burden on their family or career let them know it is okay to decline.
   
3. Would you let them handle your affairs today? If they are lacking in the knowledge and expertise now, it is doubtful they will be a suitable choice in the future.
   
4. Will this choice create ill will among the surviving beneficiaries? The trustee must be able to work through disagreements with and among other beneficiaries. Sometimes family dynamics can make it nearly impossible for the trustee to effectively discharge their duties. Don't make a choice that could lead to ill will among family members.
5. Is this person willing to accept the legal ramifications of serving as trustee? Most states have laws requiring high standards of performance by trustees. You should discuss the potential liability with any prospective trustee.

If you have a suitable relative or heir you should talk about your choice with your other heirs and beneficiaries. Let them know why and how you made your choice. This could alert you to unforeseen problems and also make sure that everyone is working from the same page.

It could be that after asking yourself these questions you may determine that a corporate trustee would be better for all. The most common reason for not naming a corporate trustee is expenses, but don't be penny wise and pound foolish. The reason you went to the trouble of setting up a trust is to protect your loved ones; a poor choice of trustee could make it all a waste.