Question:
I would like my children to inherit my qualified retirement plan. However, I want to control the distribution of those assets after I die. How can I accomplish this goal?
Answer:
You should have a trust name as the “designated beneficiary”of a qualified retirement account.
You, like many other people, may have significant assets in a retirement account and you want to be assured that after your death such assets benefit the ones they love. For example, if your surviving spouse were to remarry, the new spouse could get the money if you fail to plan ahead. If, as another example, you were in a second marriage, protecting your children from a prior marriage may be your concern. Another possibility is that you want to leave all the retirement assets to minors or individuals whom you do not trust to make good financial decisions. The terms of a designated beneficiary trust could address all of these situations.
In order for a trust beneficiary to qualify as a designated beneficiary, the trust:
must be valid under state law,
must be irrevocable or, by its terms, become irrevocable at the death of the grantor and
must have identifiable individuals as beneficiaries.
A copy of the trust must be provided to the retirement plan administrator
As long as these requirements are met, the life expectancy of the trust's oldest beneficiary will be used to determine the applicable distribution period.
Critical Note:
By selecting a trust as beneficiary, a surviving spouse would lose the opportunity to roll the retirement account over into a new qualified retirement account. This rollover is a big advantage for a spouse because the spouse can select new beneficiaries and a new distribution pattern. Your situation would have to be assessed to make sure giving up this spouse-only privilege is in your best interest.
Contact our office with your questions today.
I would like my children to inherit my qualified retirement plan. However, I want to control the distribution of those assets after I die. How can I accomplish this goal?
Answer:
You should have a trust name as the “designated beneficiary”of a qualified retirement account.
You, like many other people, may have significant assets in a retirement account and you want to be assured that after your death such assets benefit the ones they love. For example, if your surviving spouse were to remarry, the new spouse could get the money if you fail to plan ahead. If, as another example, you were in a second marriage, protecting your children from a prior marriage may be your concern. Another possibility is that you want to leave all the retirement assets to minors or individuals whom you do not trust to make good financial decisions. The terms of a designated beneficiary trust could address all of these situations.
In order for a trust beneficiary to qualify as a designated beneficiary, the trust:
must be valid under state law,
must be irrevocable or, by its terms, become irrevocable at the death of the grantor and
must have identifiable individuals as beneficiaries.
A copy of the trust must be provided to the retirement plan administrator
As long as these requirements are met, the life expectancy of the trust's oldest beneficiary will be used to determine the applicable distribution period.
Critical Note:
By selecting a trust as beneficiary, a surviving spouse would lose the opportunity to roll the retirement account over into a new qualified retirement account. This rollover is a big advantage for a spouse because the spouse can select new beneficiaries and a new distribution pattern. Your situation would have to be assessed to make sure giving up this spouse-only privilege is in your best interest.
Contact our office with your questions today.
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