Millions of Americans contribute to retirement accounts to financially prepare for life after work. Naming a beneficiary of a retirement account is crucial to ensure your assets and loved ones are protected. While most people name a spouse or child as their retirement account beneficiary, some choose to name a trust instead. Determining who to leave your retirement funds to is a big decision that requires careful consideration and thought. At the Law Offices of Marc N. Needelman, our Hartford County probate attorneys are equipped with the knowledge and skills to help you determine the best options for you and your family. Contact an experienced attorney today.
Why Should I Name a Trust as a Beneficiary of My Retirement Account?
An IRA is an investment account that you own. You can contribute to it from your income and use it as a retirement account. All retirement accounts have beneficiary designations that determine who will receive the funds upon the owner’s death. An individual may name a trust as the beneficiary, meaning that the trust will inherit the money in the account. There are both advantages and disadvantages to this option but people generally choose to name the beneficiary as a trust for the following reasons.
- Control: A trust is a solid way to ensure you can have control over your assets even after death. By naming the trust as the beneficiary of your retirement account, the trustee you appoint will maintain control over the funds.
- Limit access: A beneficiary of a retirement account is within their rights to take large distributions or even empty the account. This can be prevented by leaving the account to a trust. If you do not want the beneficiaries to have access to the entire account right away or have a plan for the funds it can be beneficial to put it in a trust and outline the terms.
- Successive beneficiaries: If you name a beneficiary of your IRA, they will name their own beneficiary once they come into ownership of the funds. You will not get to choose who they select. Putting the account in a trust ensures that you can name both the first and successive beneficiaries.
- Beneficiary limitations: There are limitations to who can own the IRA and the consequences of this ownership. For example, a minor may not be allowed to own the account. Additionally, if the beneficiary is a special needs adult they may lose access to government benefits after being awarded the assets within the account. Naming a trust as the beneficiary allows individuals to avoid these limitations.
Contact an Estate Lawyer Today
There are pros and cons to naming a trust as the beneficiary of an IRA or other retirement account. Speak to an experienced attorney today to discuss your options and determine what will be in the best interest of you and your family.
