I met with a very nice couple last week that wanted to leave their investments to a trust for their grandchildren. One of the issues that we had to deal with was that the bulk of their investments were held in their IRA account.
I spent some time educating them about what their grandchildren would be facing from an income tax standpoint. The couple expressed that they did not want the grandchildren to get any of it until they were well into their adulthood.
I explained that since they were leaving an IRA to their grandchildren - even though it is going to a trust for the grandchildren, the grandchildren will be required to take distributions starting the year after the surviving spouse dies. I explained that the best we could do would be to set things up so that after the couple died, the grandchildren would be forced to follow the rules of an "Inherited IRA" and they would be required to take immediate distributions based on their life expectancy.
Nonetheless, we are still able to accomplish their objectives of providing an income to their grandchildren for many years, and then have the remainder turned over to the grandchildren when the grandchildren are nearing retirement age.
Anytime you name someone other than your spouse as the beneficiary of your IRA, be aware of the Inherited IRA rules that they will have to follow regarding their schedule for required minimum distributions. Their schedule will likely be very different than your schedule or your spouse's required minimum distribution schedule.