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When we set up our Trust our lawyer instructed us to change our children as our secondary beneficiaries to our Trust. I was just reading Ed Slott’s The Retirement Savings Time Bomb Ticks LOUDER, and he states that there is no reason to have your trust named as a beneficiary for most people unless you have questions about the recipients responsibility. Also notes that your beneficiaries may have to empty the trust in less than 10 years.
Comments?
Most of my assets are retirement accounts. I named the beneficiary and secondary ones (and the beneficiary is someone I totally trust to use that money for my kid and grandkids, handing it out for specific expenses as needed). If I had a trust (something I am thinking about because my kid I adopted at 10 is not responsible and my grandkids will need help due to her inability to keep a job) it would be for non-retirement assets and because of the aforementioned kid I’d have a beneficiary named to make sure the money was used to needs and not wants. If, on the other hand, my kid was responsible I probably wouldn’t bother as my will would be simple anyway.
Of course there is probate but nothing in my will is complicated.
Most of my assets are retirement accounts. I named the beneficiary and secondary ones (and the beneficiary is someone I totally trust to use that money for my kid and grandkids, handing it out for specific expenses as needed). If I had a trust (something I am thinking about because my kid I adopted at 10 is not responsible and my grandkids will need help due to her inability to keep a job) it would be for non-retirement assets and because of aforementioned kid I’d have a beneficiary named to make sure the money was used to needs and not wants. If, on the other hand, my kid was responsible I probably wouldn’t bother as my will would be simple anyway. Of course there is probate but nothing in my will is complicated.
Attorney Harry Margolis on his blog states-
Given the complications of the SECURE Act, of accumulation trusts and the potential that they could be disqualified by mistake, we often try to avoid their use.
https://askharry.info/when-you-want-retirement-plans-to-be-payable-to-trusts/
While his somewhat long article is dated in 2017 all of his references to the SECURE Act leads me to believe that the article has been updated to consider the existing law.
I have read Ed Slott’s Time Bomb book and combined with my experiences as a CPA prior to my retirement make me conclude that for most people naming a trust as a IRA beneficiary often cause more problems than it solves. My CPA tax work often was dealing with mitigating mistakes after the death of the IRA owner and may not be representative of all situations. For my IRAs, my wife is the primary beneficiary and my children are the contingent beneficiaries.
Best, Bill
Thanks for your input Bill. I very much value your and several other Humble Dollar participants opinions due to the deep bench of their professions.
I know that Ed Slott is considered by Morningstar as THE expert on retirement accounts and their interactions with the IRS.
Still awaiting the opinion of my estate lawyer who is on vacation, so I thought this is an important issue worth throwing out into the ether of the HD forum.
Will most likely contact my fee only advisor (who is also an attorney) for his opinion if the estate attorney doesn’t agree naming the estate as the secondary beneficiary should be reversed.