In this Elder Law Minute, Wes Coulson explains the scenarios in which you should or shouldn’t name a living trust as beneficiary of an IRA.
Video Transcript:
Greetings, I’m Wes Coulson from Dent Coulson Elder Law and this will be your Elder Law Minute. We’re happy to present these because we think we can help inform you as to the ways in which we can help you and the things that you need to think about relative to the elder care and estate planning journey. Hope you enjoy!
IRAs and other what are known as “qualified retirement assets” require some special attention
in estate planning. As the first thing, if you have a living trust, your living trust cannot own an IRA or other retirement asset, a 401k, a 403b, a simple plan, a keyal plan, things of that sort during your lifetime. Those are all in the nature of IRAs and as we like to tell people, the I in IRA stands for individual. You can’t own an IRA together as a married couple, because a married couple is not an individual and neither is a trust.
Now the question is, “if you have a Living Trust should you name it as beneficiary of your IRA?” The answer to that question is that it very much depends on the language of the living trust. If you don’t have special provisions in the Living Trust that make your IRA an appropriate beneficiary, then the answer is no, but if you do then in many situations the answer is yes. You have the advantages of a Living Trust and if it’s set up correctly, your Living Trust, if it’s for your spouse’s beneficiary can still qualify for spousal rollover. If your children are beneficiaries, then one of the things that we can do, by have your living trust in the beneficiary, is throw that money in the pot with other assets and let’s say that your kids, one of them is in the 12% bracket, one of them is in the 22% bracket and one of them is doing really well in the 32% bracket, we can leave more Living Trust money to the one in the lower tax bracket, kind of equalize shares a little bit to take into account tax considerations but it gives some flexibility for when that IRA is withdrawn after you die to have a tax at a lower rate.
Thanks
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Dent-Coulson Elder Law is dedicated to providing families in the St. Louis area with their Elder Law needs. Our practice areas include Asset Preservation Planning, Veterans Benefits, Medicaid Eligibility, Alzheimer’s Planning, Special Needs Planning, Estate Planning and more. We understand the financial challenges you may face as you and your loved ones grow older. At Dent-Coulson Elder Law, our clients’ well-being is our number one priority. For immediate help, call (618) 632-7000 (IL) or (314) 567-9292 (MO), or Contact Us and we will get in touch as soon as possible.
