401k Beneficiary is Living Trust | Ed Slott and Company, LLC

401k Beneficiary is Living Trust

Submitted by mhilgenberg@reg... on Fri, 2011-08-26 16:45
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IRA Discussion Forum
A client and his wife have a living trust, it is their second marriage so he wants his 401k to go to the trust so it will pay her for life and then be left to their children. It is an A, B Q trust with a automatic split of the trust assets to the A and B. The 401k custodian said in the event of death they would make a check out to the trust. Would the wife be able to use her age for RMD purposes and would the kids be able to use stretch? Thanks

Submitted by mhilgenberg@reg... on Fri, 2011-08-26 17:04
I guess my first question should have been would that check be eligible for an IRA rollover?

Submitted by [email protected] on Fri, 2011-08-26 17:11
One would have to see exactly what the trust says to answer these questions. If he wants the IRA to go to her so she can roll it over, he could simply name her as the beneficiary. If it runs through the living trust, she might or might not be able to roll it over, and if not, it might or might not be possible to stretch the benefits out over her life expectancy. He may wish to consult with competent tax/estates counsel, who can give him more specific advice based upon the particular facts and his objectives.

Submitted by mhilgenberg@reg... on Fri, 2011-08-26 17:22
Thanks. He wants it to go to her for income only but not risk disinheriting his kids. It looks like the trust says spouse shall receive "income" but I think that doesn't mean RMD. It seems like making the check out to the trust would be a taxable event correct?

Submitted by [email protected] on Fri, 2011-08-26 17:33
When the trust funds the marital share or the credit shelter share with the IRA, it might or might not be a taxable event. Rather than trying to figure out what he did and what the consequences of it might be, it would probably be make more sense for him to consult with competent tax/estates counsel who can recommend how he can best accomplish his objectives.
 

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