trust as beneficiary
If an IRA owner wants to name a trust as beneficiary of an IRA, does a trust document need to be created first or can a testamentary trust (created through the will) get the job done? Also, how should the trust be listed in the beneficiary designation section of IRA application?
Permalink Submitted by Al Fry on Mon, 2008-02-18 23:34
It can be either. “The Abe Lincoln Trust, dated 04/14/1865” or “The Abe Lincoln Testamentary Trust under The Abe Lincoln Will dated 04/14/1865”. Testamentary Trusts are not used much here in Indiana anymore, most are all Living Trusts, which can be used prior to death.
Permalink Submitted by Bruce Steiner on Wed, 2008-02-20 15:36
Since I know that Indiana has unsupervised probate, I asked an attorney in Indiana whom I respect about this.
I asked her: An insurance guy says that “everyone” is doing revocable trusts in Indiana. I thought you had unsupervised probate. If so, then why would “everyone” bother with revocable trusts?
She responded: The public is being sold by attorneys who are giving seminars at hotels and charging large fees for will, revocable trusts, POAs, living wills, etc–they don’t want to wait until the clients pass from this world to get their estate fees–so they charge excessive fees now by scaring people about the evils of probate–all exaggerated!!
In view of this, I would be skeptical of anyone in Indiana who recommended revocable trusts absent some particular reason for doing so in that particular case.
Permalink Submitted by Al Fry on Sat, 2008-02-23 13:26
Some of the attorneys in Fort Wayne charge more for testamentary trusts than RLTs since they consider them out of the ordinary. They do not do seminars and provide pro bono wills at the senior center and on “Leave A Legacy Day”. I think it it just a matter of preference. All of my friends here in IN that have trusts have RLTs. I try to steer them clear of the “Free Seminars” with wine and cheese since many offer over-priced boiler-plate RLTs. I have been to some, however that are on the up-and-up. I like to try and keep them honest!
Permalink Submitted by Bruce Steiner on Sun, 2008-02-24 04:41
It does not make sense that it could cost more for a Will than for a revocable trust, since (i) if you’re doing a revocable trust, you still need a Will to deal with any assets not in the trust, (ii) drafting a revocable trust is more work than drafting a Will, and (iii) there’s some additional time involved in discussing the concept of a revocable trust with the client.
The free seminars aren’t free. If you’re the one who buys the time share or the living trust or whatever else the presenter is selling, not only did you pay for your free dinner, but you paid for the free dinners for everyone else in the room.
Revocable trusts may be useful in those states where probating a Will, or dealing with the probate court, is very difficult or cumbersome. But Indiana has unsupervised probate (meaning that you generally don’t have to deal with the court). Even in states where probating a Will or dealing with the probate court is not generally a problem, there are cases where revocable trusts may make sense. But absent some reason for having one in the particular case, if someone were to recommend one, I would suggest getting another opinion. I previously posted the response I received from an attorney in Indiana.
Permalink Submitted by Alan Spross on Sun, 2008-02-24 05:12
Another incentive to sponsor the free RLT seminars relates to gaining advisory control over a person’s investments. While reviewing the assets that must be titled to the trust or retirement accounts that might be named as beneficiary, the trust attorneys are partnering up with various planners and advisors with the trust being a lead in to gain control of the other assets. Such things as annuities, particularly equity indexed annuities, and even viaticals still may end up being sold to a senior whose free lunch is hardly that.
Permalink Submitted by Al Fry on Sun, 2008-02-24 05:21
Bruce – I fully agree. I always look forward to your comments. I have quoted you many times (with proper credit).