Month: March 2017

Should You Name a Revocable Living Trust as a Beneficiary of an IRA?

We recently had some discussions with a Madison family that was trying to make the most of their father’s IRA and had questions about naming the beneficiary of an IRA. The family wanted to make sure that after the father died, the IRA would benefit one of the children, and then after that child died, the family wanted the IRA to be shared among the other children.

retirement trustThe family kept asking: “Should we name the child as the beneficiary, or should we name a trust (for the benefit of the child) as the beneficiary.

One of the children was married to an accountant. His suggestion (whether it has merit or not is debatable) was, “Don’t name a trust as the beneficiary of an IRA because I hate trusts.”

One of the children stated, “Dad wants it left to a trust for the benefit of a child so that Dad has the assurance that when the child dies, the remaining IRA would go to the child’s siblings.”

What should they do?

What Are Some Options Besides A Full Probate?

An affidavit of transfer is an alternative option to probate only when people have less than $50,000 in probateable assets, in other words, anything that would pass through the probate court. Typically that would include any real estate, bank accounts or other personal property which was held in the deceased person’s name. However, again the total of all assets would have to be under $50,000.

Another option for estates over $50,000 to avoid probate requires planning before the person passes away.

Another option to avoid probate is by creating a revocable trust and then transferring all of the assets into that trust. Upon doing so, if a person then dies, there would be no need for a court case. This is the best way for most people to plan their estates.

There are other less comprehensive and generally less advisable ways for specific assets to avoid probate. These include payable on death (POD) or transfer on death (TOD) designations on bank or investment accounts or real property. Assets held jointly with rights of survivorship will also transfer without probate if one joint owner dies and the other joint owner survives.

While there are many ways to avoid probate on specific assets as discussed, our attorney’s have some very serious concerns regarding planning estates with PODs and TODs and joint ownership. Often when people plan with these methods, they do not consider the interaction of different assets and the availability of assets to pay for things like funerals, real property taxes, mortgage payments, utilities, etc. after a person’s death. However, all of those can be protected by creating a living trust and transferring all of the assets into that trust in order to avoid probate.

Why Do People Generally Fear The Probate Process? …

Does A Retirement Plan Pass Through Probate? Part Two

What Types Of Trusts Are Useful In Protecting Retirement Plans?

There are a number of schools of thought here. In our practice, we feel a revocable living trust is not a good vehicle to handle retirement plans. Often these are not drafted with the appropriate language to comply with the IRS service regulations to be what’s called a “see-through trust”. A Retirement Plan Trust is specifically drafted to comply with the service regulations and meet all the criteria so that if this trust is designated as the beneficiary, you will be able to preserve the tax deferral for those named beneficiaries to get the stretch advantages.

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