Naming Revocable Trust as Secondary Beneficiary on 401(k) Plan
I have a married client in mid their 40s that just completed estate planning work with an attorney. The attorney recommended he name his wife as the primary beneficiary and his Revocable Trust as the secondary beneficiary on his 401(k) plan. He has two young children under ten who benefit from the Revocable Trust.
Is this a good idea to name the Rev Trust as a secondary beneficiary? Are there any negative implications if he and his wife were to pass away together, and now the Trust would be the beneficiary instead of going to his estate or naming the children’s Guardians?
Thanks,
Joe
Permalink Submitted by Alan - IRA critic on Mon, 2023-04-10 18:12
Assuming that the trust will become irrevocable and contains provisions regarding distributions to minors, the key is that the trust will be qualified for look through. The trustee of the trust will have to submit the trust info to the 401k administrator by the 10/31 deadline or if for any other reason the trust is not qualified and the 5 year rule applies, the 401k will in addition likely make a lump sum distribution to the trust. Otherwise, if the trust is qualified and no remainder beneficiary can receive funds as long as any of the children remain living, the RMDs to the trust would be based on the LE of the oldest child until that child reaches 21, then the 10 year rule will kick in. Note however, that simultaneous deaths are extremely unlikely subject to the state’s statutes regarding the Uniform Simultaneous Death Act.
Permalink Submitted by Joseph Carbone on Mon, 2023-04-10 18:19
Thank you!
Permalink Submitted by Bruce Steiner on Thu, 2023-05-04 21:59
It creates an extra step, since the trustees of the revocable trust will have to distribute the inherited IRA. Why not name the beneficiaries of the revocable trust, or trusts for their benefit?
Permalink Submitted by Nelie Cruz on Thu, 2024-01-04 17:12
I am planning to set up a living trust and my concern is that all of my siblings and nephews and nieces are all in the Philippines. Only one sibling is here with me in CA. Can I designate my relatives in the Phlippines as benefdiciaries in my living trust? If so, what are the tax implications?Can I include my IRA into my living trust? If so, what are the tax implications?I am looking forward to your reply. Thank you!