How to include living trust as beneficiary in investment account?

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infotrader
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How to include living trust as beneficiary in investment account?

Post by infotrader » Wed Aug 30, 2017 9:23 am

My wife and I have a living trust. When we set up it, we were told that we need to name it as the primary beneficiary for investment account. I wonder how to do it.

Do I put it as the only beneficiary? What should I do with secondary one? I have a son and daughter, and we will split the funds equally between them. I think I heard that I will list my kids as secondary beneficiaries, but is there any point doing it?

student
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Re: How to include living trust as beneficiary in investment account?

Post by student » Wed Aug 30, 2017 9:28 am

You treat the living trust just like a person when filling out beneficiary form. How is your trust being set up? What does the lawyer recommend. In my case, I have used the living trust as primary in some cases and secondary in other cases.

infotrader
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Re: How to include living trust as beneficiary in investment account?

Post by infotrader » Wed Aug 30, 2017 9:32 am

student wrote:
Wed Aug 30, 2017 9:28 am
You treat the living trust just like a person when filling out beneficiary form. How is your trust being set up? What does the lawyer recommend. In my case, I have used the living trust as primary in some cases and secondary in other cases.
I set it up with a lawyer who said:
trust: primary
kids: secondary
I wonder if it makes sense.

student
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Re: How to include living trust as beneficiary in investment account?

Post by student » Wed Aug 30, 2017 9:41 am

infotrader wrote:
Wed Aug 30, 2017 9:32 am
student wrote:
Wed Aug 30, 2017 9:28 am
You treat the living trust just like a person when filling out beneficiary form. How is your trust being set up? What does the lawyer recommend. In my case, I have used the living trust as primary in some cases and secondary in other cases.
I set it up with a lawyer who said:
trust: primary
kids: secondary
I wonder if it makes sense.
I believe this makes sense especially if you have provision in your trust that covers the scenario when this happens when before they are 18. I assume you and your spouse are co-trustees and all accounts are in both of your names. I recommend that you read this.
https://www.amazon.com/Living-Trusts-Ev ... ving+trust

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dm200
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Re: How to include living trust as beneficiary in investment account?

Post by dm200 » Wed Aug 30, 2017 9:44 am

infotrader wrote:
Wed Aug 30, 2017 9:23 am
My wife and I have a living trust. When we set up it, we were told that we need to name it as the primary beneficiary for investment account. I wonder how to do it.

Do I put it as the only beneficiary? What should I do with secondary one? I have a son and daughter, and we will split the funds equally between them. I think I heard that I will list my kids as secondary beneficiaries, but is there any point doing it?
it seems to me that, as part of what the attorney did, you should have received very detailed instructions from him/her about this.

kaneohe
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Re: How to include living trust as beneficiary in investment account?

Post by kaneohe » Wed Aug 30, 2017 9:46 am

Wondering why the trust is not the owner of the account so the accounts would already be there?

sport
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Re: How to include living trust as beneficiary in investment account?

Post by sport » Wed Aug 30, 2017 9:55 am

kaneohe wrote:
Wed Aug 30, 2017 9:46 am
Wondering why the trust is not the owner of the account so the accounts would already be there?
This is my reaction also. When I set up my living trust, all the investments were transferred into the trust. This gives me protection in case I am disabled as well as providing for my heirs as well as the other benefits of having a trust.

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HueyLD
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Re: How to include living trust as beneficiary in investment account?

Post by HueyLD » Wed Aug 30, 2017 10:10 am

My guess is that the OP might have misunderstood his lawyer's instructions.

The OP might have confused taxable accounts with retirement accounts. I think the instructions for retirement accounts indicate that the spouse is the primary beneficiary and the RLT is the secondary beneficiary.

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dm200
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Re: How to include living trust as beneficiary in investment account?

Post by dm200 » Wed Aug 30, 2017 12:13 pm

HueyLD wrote:
Wed Aug 30, 2017 10:10 am
My guess is that the OP might have misunderstood his lawyer's instructions.
The OP might have confused taxable accounts with retirement accounts. I think the instructions for retirement accounts indicate that the spouse is the primary beneficiary and the RLT is the secondary beneficiary.
Decades ago, when we did an estate plan with complex wills containing testamentary trusts, the attorney gave us detailed written instructions. These detailed, written instructions were part of the fixed price.

Dottie57
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Re: How to include living trust as beneficiary in investment account?

Post by Dottie57 » Wed Aug 30, 2017 12:35 pm

kaneohe wrote:
Wed Aug 30, 2017 9:46 am
Wondering why the trust is not the owner of the account so the accounts would already be there?

This is my thought too. If the trust is a beneficiary, i think it has to pay estate taxes.

bsteiner
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Re: How to include living trust as beneficiary in investment account?

Post by bsteiner » Wed Aug 30, 2017 12:55 pm

HueyLD wrote:
Wed Aug 30, 2017 10:10 am
...
The OP might have confused taxable accounts with retirement accounts. I think the instructions for retirement accounts indicate that the spouse is the primary beneficiary and the RLT is the secondary beneficiary.
More likely the contingent beneficiaries are the children or grandchildren or trusts for their benefit.

infotrader
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Re: How to include living trust as beneficiary in investment account?

Post by infotrader » Wed Aug 30, 2017 2:10 pm

Thanks. I will go back and see if there is any written instruction from the attorney.

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FIREchief
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Re: How to include living trust as beneficiary in investment account?

Post by FIREchief » Wed Aug 30, 2017 3:38 pm

infotrader wrote:
Wed Aug 30, 2017 9:32 am
student wrote:
Wed Aug 30, 2017 9:28 am
You treat the living trust just like a person when filling out beneficiary form. How is your trust being set up? What does the lawyer recommend. In my case, I have used the living trust as primary in some cases and secondary in other cases.
I set it up with a lawyer who said:
trust: primary
kids: secondary
I wonder if it makes sense.
Since the trust never "dies," why would you need contingent beneficiaries?
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

Lastrun
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Re: How to include living trust as beneficiary in investment account?

Post by Lastrun » Wed Aug 30, 2017 4:00 pm

Typical advice here is:

1. Retirement Accounts
First to spouse
Second to Trust
Third to Adult Kids

Allows (a) spouse to rollover or disclaim to bypass trust if set up properly (b) trust to take if spouse is dead or possibly if spouse is disabled through disclaimer by spouse's POA, (c) allows trustee to disclaim to adult kids to all simpler qualification for "stretch rules."

2. Taxable Accounts
To Trust

I have seen attorneys recommend that the spouse or kids be included in the order with the idea that the trustee could disclaim down the chain of contingent beneficiaries. Honestly, there are a lot of variations here by reasonable minds.

In most states you NEVER want to have a minor on a beneficiary designation=automatic requirement for appointment of "guardian of the estate of the child"
Dottie57 wrote:
Wed Aug 30, 2017 12:35 pm
kaneohe wrote:
Wed Aug 30, 2017 9:46 am
Wondering why the trust is not the owner of the account so the accounts would already be there?

This is my thought too. If the trust is a beneficiary, i think it has to pay estate taxes.
Sometimes clients will not put the account into the name of the trust(s) for a myriad of reasons, and the easier approach is to have the account pass by beneficiary designation or TOD to the trust(s). Some examples are to have more deposit insurance coverage at a single financial institution, and in some states, transfer to a trust will cause the loss of tenants by the entirety protection on the accounts.

Should be no difference on estate taxes in a well-drafted plan as to where the beneficiary designation goes, with the exception of the spouse (unlimited marital deduction).

sport
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Re: How to include living trust as beneficiary in investment account?

Post by sport » Wed Aug 30, 2017 4:30 pm

Isn't it true that if a trust inherits an IRA, that the account must be distributed within 5 years? Children would be eligible for stretched withdrawals.

bsteiner
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Re: How to include living trust as beneficiary in investment account?

Post by bsteiner » Wed Aug 30, 2017 5:08 pm

sport wrote:
Wed Aug 30, 2017 4:30 pm
Isn't it true that if a trust inherits an IRA, that the account must be distributed within 5 years? ....
Not necessarily. See my article on this in the March 2004 issue of BNA Tax Management's Estates, Gifts & Trusts Journal: https://www.elderlawanswers.com/Documen ... nefits.pdf.

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