retirement benefit plan trust
Trusts have been set up in a Will to hold the deceased’s remaining property and will terminate 1/4 at 25, 1/3 at 30 and the remaing balance to be distributed outright at age 35. Separate trusts will be set up for retirement benefit plans including all the appropriate language. The Will states that the Plan Benefits Trusts shall be identical to its corresponding trusts (ie the above mentioned trusts). Will drafting it this way cause any tax problems for the beneficiaries upon termination of the trusts?
Permalink Submitted by Bruce Steiner on Sun, 2008-02-24 04:22
If the trusts are going to be the same, then you don’t need separate trusts for the IRA benefits and the other assets. The reason for separate trusts is so as not to subject the other assets to the restrictions needed for the trusts that receive the IRA benefits (namely that none of the IRA distributions can ever go to anyone older than the desired measuring life).
The tax disadvantage of requiring payout by age 35 is that it throws the entire inheritance into the beneficiary’s estate if the beneficiary lives to age 35.