Qualified Trust

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 or ... Read Answer >>
  2. Do beneficiaries of a trust pay taxes?

    Learn how interest income from a trust is taxed, and understand when this money is taxable to the trust and when it is taxable ... Read Answer >>
  3. What is the difference between revocable and irrevocable intervivos trusts?

    Learn what an inter-vivos trust is, the difference between an irrevocable and a revocable inter-vivos trust, and why it is ... Read Answer >>
  4. Can I put my IRA in a trust?

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  5. How do I list the beneficiaries of my life insurance policies if I have a trust? ...

    Because most states protect life insurance policies from creditors, most buyer questions come from the confusion created ... Read Answer >>
  6. Is an IRA a qualified plan?

    Learn about the definition of a qualified retirement plan and some of the features and benefits of individual retirement ... Read Answer >>
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