When you are choosing beneficiaries, you don’t always have to choose a person. You can set up a trust and leave assets behind that way, but does that mean that you can leave just about anything you want in a trust? Could you make it a retirement account beneficiary, for example? A Des Moines estate trust administration lawyer can answer that question and any other query you may have.
Get Help TodayNothing prevents you from making a trust a retirement account beneficiary. Trusts just need to be funded, and how you fund them is often up to you. Some people choose to transfer assets into their trust while they are still alive, but you can also make a trust a beneficiary for an account that needs to be transferred to someone else once you pass away.
There are some benefits to doing things this way, but there are also some potential disadvantages of making a trust a retirement account beneficiary. Our lawyers can advise you on this and help you figure out if it’s a good arrangement for you.
When you make a trust a retirement account beneficiary, you do not have to worry about the cost of probate and these particular assets can go right into your trust. If you want to minimize costs and the potential for conflict, doing things this way can be a great idea.
Making a trust a beneficiary can also work well if you intend to leave the money to someone who may not be the most responsible with money. The trustee that you put in charge can help a minor child or a loved one with disabilities make use of the money without squandering it.
Of course, there are often trade-offs when it comes to making estate plans, so you should know that there are some potential issues with making a trust a retirement account beneficiary. The first issue is that this might not be an ideal way to split up a retirement account among multiple children or loved ones. There are rules about how much needs to be withdrawn each year, and that can complicate matters when there are multiple heirs of different ages.
The SECURE Act of 2019 also affects non-spousal beneficiaries of many types of retirement accounts. Your beneficiaries may need to empty the account within 10 years, potentially robbing them of interest and additional funds. There are exceptions included in this legislation though, so it may be worthwhile to see if this is still a good option for you and your family.
When you are ready to make an estate plan of your own, contact Herting Law, PLLC. We can help you explore all of your options, including trusts, and we can ensure that your plan is ideal for your estate and your beneficiaries. Schedule your consultation today.
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