Q: Should these be in my revocable living trust?
I came across an article on assets that don't belong in a revocable trust. "Qualified retirement accounts, including 401(k)s, 403(b)s, IRAs, and qualified annuities shouldn't reside within your revocable living trust. The reason is the transfer would be treated as a complete withdrawal of funds from your account. Subsequently, 100 percent of the value would be subject to income tax in the year the transfer is made. What you should do is change the primary or secondary beneficiary of your account to your trust.". I have two public service retirement accounts which were listed in my trust of 2003. Both accounts are in my personal name, with the trust as my beneficiary, the same with two annuities. Should I delete them on my Schedule A if indeed they would be taxable, and just list them on a separate sheet not part of the trust as other assets? Rather confused--thank you for any clarification you can offer.
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A:
When considering whether to include your public service retirement accounts and annuities in your revocable living trust, it's important to understand the potential tax implications. As the article you read indicated, transferring qualified retirement accounts into a trust can lead to them being treated as withdrawn, thereby incurring significant tax liabilities.
For your retirement accounts, naming the trust as a beneficiary can be a strategic move for estate planning purposes. This allows for the management of these assets according to the terms of the trust after your passing, without triggering immediate tax consequences.
Regarding the annuities, the same principle applies. It's generally more tax-efficient to name the trust as a beneficiary rather than transferring the annuities into the trust.
In light of this, it might be more appropriate to list these accounts separately from the trust assets, perhaps on a different document that outlines your overall estate plan. This helps in keeping a clear record without implying that these accounts are direct parts of the trust.
Given the complexity of estate planning and the specific tax laws involved, it would be wise to consult with an estate planning attorney or a financial advisor. They can provide personalized advice tailored to your particular situation and help ensure that your estate plan aligns with your goals while minimizing tax implications.
Nina Whitehurst agrees with this answer
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