Question: Should I change the ownership of my retirement plan to my revocable (living) trust?
Answer: For the revocable trust to work as intended, it requires funding the trust, or, in other words, titling one’s assets in the name of the trust. Otherwise, assets not titled in the name of the trust at the time of death may be subject to probate, in spite of the existence of the revocable trust.
Retirement plan assets, however, are an important exception to this general rule of thumb. For example, placing IRA assets in the name of the trust will trigger income taxes and, if under age 59 ½, penalties.
Therefore, your ownership should not be transferred, but, your trust could be named as the beneficiary of the IRA. It may make sense to do this in the planning context, but doing so could have unintended tax consequences that need to be considered as well.
As always, if you have any questions or would like to learn more, please contact Steve Shane at firstname.lastname@example.org or .
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Steve Shane provides strategic counseling to clients in need of estate administration, charitable giving and business continuity planning while minimizing estate, gift, and generation-skipping transfer tax exposure. He offers legal guidance to clients on asset protection and the proper disposition of assets in accordance with the client’s objectives, while employing tax planning techniques such as the use of irrevocable trusts, life insurance planning, lifetime gifts and charitable trust. He is also experienced with drafting documents for business planning, the incorporation and application for exemption for Private Foundations and the administration of decedents’ estates.
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