I would like to know which of the above is the best way to manage the accounts now and when they become my beneficiaries.
This is a loaded question and really depends on looking at the complete estate planning picture. The retirement accounts are not great candidates to be placed in trust as their are some complicated income tax implications. You need to have a comprehensive estate plan established to know what is best for you. For more on this process please read my legal guide entitled Estate Planning Mistakes: 5 Not So Easy Pieces at http://www.sjfpc.com/estate_planning_drafting_wills_trusts.html. After you read this you may gain an understanding of what is involved in this process.
Hope this helps.
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Mr. Fromm is licensed to practice law throughout the state of PA with offices in Philadelphia and Montgomery Counties. He is authorized to handle IRS matters throughout the United States. His phone number is 215-735-2336 or his email address is [email protected] , his website for more tax, estate and business articles is www.sjfpc.com. and his blog is
LEGAL DISCLAIMER Mr. Fromm is licensed to practice law throughout the state of PA with offices in Philadelphia and Montgomery Counties. He is authorized to handle IRS matters throughout the United States. His phone number is 215-735-2336 or his email address is [email protected] , his website is www.sjfpc.com. and his blog is <http://frommtaxes.wordpress.com/> Mr. Fromm is ethically required to state that the response herein is not legal advice and does not create an attorney/ client relationship. Also, there are no recognized legal specialties under Pennsylvania law. Any references to a trust, estate or tax lawyer refer only to the fact that Mr. Fromm limits his practice to these areas of the law. These responses are only in the form of legal education and are intended to only provide general information about the matter within the question. Oftentimes the question does not include significant and important facts and timelines that if known could significantly change the reply or make such reply unsuitable. Mr. Fromm strongly advises the questioner to confer with an attorney in their state in order to ensure proper advice is received. By using this site you understand and agree that there is no attorney client relationship or confidentiality between you and the attorney responding. This site should not be used as a substitute for competent legal advice from a licensed attorney that practices in the subject area in your jurisdiction, who is familiar with your specific facts and all of the circumstances and with whom you have an attorney client relationship. The law changes frequently and varies from jurisdiction to jurisdiction. The information and materials provided are general in nature, and may not apply to a specific factual or legal circumstance described in the question or omitted from the question. Circular 230 Disclaimer - Any information in this comment may not be used to eliminate or reduce penalties by the IRS or any other governmental agency.
I agree with Attorney Fromm on this. You need to have qualified tax counsel advise you as to what is the best option, here. For many retirement assets, naming a trust eliminates the options many beneficiaries might have to further defer income taxes in relation to these assets. Bank accounts are less of an issue. Either way, you avoid the need for probate when a beneficiary is named on these assets.
I am licensed to practice law in the State of Michigan and have offices in Wayne and Ingham Counties. My practice is focused in the areas of estate planning and probate administration. I am ethically required to state that the above answer does not create an attorney/client relationship. These responses should be considered general legal education and are intended to provide general information about the question asked. Frequently, the question does not include important facts that, if known, could significantly change the answer. Information provided on this site should not be used as a substitute for competent legal advice from a licensed attorney that practices in the subject area in your state. The law changes frequently and varies from state to state.
I agree with both attorneys who have answered this question that you need to consult with an attorney before naming the trust (or a subtrust thereunder) as the beneficiary of your retirement plans. It may be appropriate to name the trust or you may want to specify individuals or charities as beneficiary. An attorney can discuss your goals with you and let you know the pros and cons of each approach to achieving those goals.
I read your question as also asking if you should transfer your retirement accounts to your trust (the way you do with your other assets). If this was also what you were asking, the answer is NO. During your lifetime, you should NOT transfer the retirement plans themselves to your trust. Doing so can have adverse tax consequences to you.
You need to consult with an attorney. If you decide to name your trust as a beneficiary, the way that is done and the way the trust is drafted have consequences to your beneficiaries that can be dramatically different based on the language of the trust and the language of the beneficiary designation. This is NOT a " do it yourself" project!
DISCLAIMER: THE INFORMATION PRESENTED HERE IS GENERAL IN NATURE. IT IS NOT INTENDED, NOR SHOULD IT BE CONSTRUED, AS LEGAL ADVICE. THIS RESPONSE DOES NOT CREATE AN ATTORNEY-CLIENT RELATIONSHIP BETWEEN US. YOU SHOULD CONSULT WITH A QUALIFIED ATTORNEY FOR SPECIFIC LEGAL ADVICE ABOUT YOUR PARTICULAR SITUATION.
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