Qualified Trust

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DEFINITION of 'Qualified Trust'

A tax-advantaged fiduciary relationship between an employer and an employee in the form of a stock bonus, pension, or profit-sharing plan in which the underlying beneficiary may use his or her life expectancy to determine required minimum distribution amounts. Section 401(a) of the Internal Revenue Code authorizes and sets forth the requirements for a qualified trust.

BREAKING DOWN 'Qualified Trust'

To be qualified, a trust must be valid under state law, must be irrevocable (or become irrevocable when the retirement account holder dies) and must have identifiable beneficiaries. Furthermore, the IRA trustee, custodian or plan administrator must be provided with a copy of the trust instrument. If a qualified trust is not structured correctly, disbursements will be taxable.

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RELATED FAQS
  1. What are the requirements that a trust needs to meet to be qualified?

    The requirements that a trust must meet to be qualified are as follows: The trust must be a valid trust under state law ... Read Full Answer >>
  2. Where can I find information on how to distribute my deceased parent's assets?

    Related information can be found in IRS publication 590. See page 32 (bottom right hand corner) and page 35. If the trust ... Read Full Answer >>
  3. Can you buy penny stocks in an IRA?

    It is possible to trade penny stocks through an individual retirement accounts, or IRA. However, penny stocks are generally ... Read Full Answer >>
  4. Can I use my IRA to pay for my college loans?

    If you are older than 59.5 and have been contributing to your IRA for more than five years, you may withdraw funds to pay ... Read Full Answer >>
  5. Can my IRA be used for college tuition?

    You can use your IRA to pay for college tuition even before you reach retirement age. In fact, your retirement savings can ... Read Full Answer >>
  6. Why are IRA, Roth IRAs and 401(k) contributions limited?

    Contributions to IRA, Roth IRA, 401(k) and other retirement savings plans are limited by the IRS to prevent the very wealthy ... Read Full Answer >>

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