Trust as 401k Bene
Attorney has recommended that my client name his Revocable Trust as the beneficiary of his $1 million 401k. His wife and two daughters (in 20’s) are the beneficiaries of the Trust. In the event of his death, can a Beneficiary IRA be established to receive the 401k assets naming the Revocable Trust so that RMD’s will flow through to the trust annually? I understand that his wife as the oldest beneficiary would be the measuring life for RMD’s. He is only 57 years old and widow is several years younger than he.
Permalink Submitted by Bruce Steiner on Thu, 2014-03-06 02:51
Whether the trust can stretch distributions over the wife’s life expectancy will depend on the terms of the trust. However, running an IRA through a revocable trust can create problems. For more on trusts as beneficiaries of retirement benefits, see my article on that subject in the March 2004 issue of BNA Tax Management’s Estates, Gifts & Trusts Journal: http://www.kkwc.com/docs/AR20041209132954.pdf. Even if the trust can stretch distributions over the wife’s life expectancy, the income tax result is much less favorable than leaving the retirement benefits to the wife.