The funds within your retirement account may serve as a steady stream of income in the years following your exit from the workforce. Then, your remaining balance may serve as a source of financial support for your loved ones when you are, sadly, no longer around to take care of them yourself. You may not realize it at first, but you may have to be rather strategic with who or what you name as the beneficiary of your retirement account. One option you should strongly consider is naming your trust. With that being said, read on to discover whether a trust should be your retirement account beneficiary and how a seasoned Broward County trust lawyer at The Probate Lawyers can help you better grasp what this entails.
Who can serve as a retirement account beneficiary?
In referencing the Employee Retirement Income Security Act of 1974, you can assume that your surviving spouse is the automatic beneficiary of your retirement account. That is, they are at least entitled to 50 percent of it. This is unless you explicitly list other individuals to serve as your beneficiaries, such as your child, grandchild, or another close family member. Importantly, it may not count if you only name these individuals in your will document.
You must understand that your retirement account may be distributed to your probate estate if you do not have a surviving spouse and have not named any other beneficiaries. The estate may then have five years to expend the account’s funds. Ultimately, this may defeat the point of one of your retirement account’s main benefits, which is to defer taxes.
Can I name a trust as my retirement account beneficiary?
Instead of naming one of your loved ones as the beneficiary of your retirement account, you may name them as the beneficiary of your established trust. Then, you may designate your established trust as the beneficiary of your retirement account. In this way, your beneficiary may still receive your retirement account’s funds, just in a slightly different way.
You may be wondering about the purpose behind this indirect approach. Well, for example, this may serve as a better strategy if your desired beneficiary is still of a minor age. This is because they may not be responsible enough to handle this large lump sum of money. So, you may appoint a trustee for your trust who may manage its assets and appropriately distribute them to your beneficiary once they reach a mature enough age.
In another example, your desired beneficiary may have special needs. With this in mind, you may feel more comfortable maintaining these funds in a special needs trust.
At the end of the day, if you have any lingering doubts about your estate planning decisions, a competent Broward County estate lawyer can help relieve them. So whenever you are ready to start, please reach out to The Probate Lawyers.
