When you begin planning your estate, there are several considerations you’ll need to make, from creating a will to establishing trust funds to ensure your assets are protected and distributed the way you want. One thing you may forget to consider, however, is what will happen to your retirement account. You may be surprised to learn that you can actually name your trust fund as the beneficiary of a retirement account. Not sure why you should consider doing so? The following blog explores what you must know and why it’s in your best interest to connect with our Tampa estate planning lawyers to explore your legal options during these complicated times.
Is It Possible to Name a Trust Fund a Retirement Account Beneficiary?
When you set up a retirement account, whether through your bank or your employer, you may feel an additional sense of security knowing that you’re actively accruing funds to help you enjoy your life once you leave the workforce. However, it’s important to understand that when you’re creating this account, you have the option to name a beneficiary. This is the person who would inherit your retirement account upon your passing.
However, you may be surprised that you don’t have to name an individual to this account. Instead, you can name your trust fund the beneficiary of your account, whether a 401(k), IRA, Profit Sharing Plan, or other pensions. As such, upon your passing, the retirement account would be transferred to the trust and managed like any other asset held in the fund.
What Are the Pros and Cons of This Option?
Generally, one of the only cons of naming a trust fund as the beneficiary of a retirement account is that there are minimum distribution payouts that will be calculated based on the life expectancy of the oldest beneficiary. This can make it difficult for other beneficiaries to stretch the benefits of their plans.
Additionally, it may impact your spouse as there is no clear method for a spouse who receives funds from a trust holding a treatment account to treat the money as their own.
However, naming your trust fund the beneficiary of your retirement account can be incredibly beneficial for those who want their minor children or a relative with a disability to receive the money. By transferring the funds to the trust rather than directly to the beneficiaries, you have greater control over how these assets are handled. This means minor children won’t come into a large sum of money at once, limiting irresponsible spending. Additionally, a relative with a disability can be disqualified from government assistance benefits by inheriting a large sum of money. Instead, placing the funds in a trust allows the trustee to help manage these assets to prevent issues.
As you can see, there are many considerations you’ll need to make when establishing a trust fund and choosing a beneficiary for your retirement account. That’s why it’s in your best interest to work with an estate planning attorney from Tampa Law Group who can help you during these complicated times. Connect with our team today to learn how we can help you explore your legal options to ensure your assets are protected.
