When planning your estate, it’s no secret that there are many considerations you’ll need to make to make a plan that represents your wishes. From determining what kind of will is right for you to whether or not you need to establish a trust fund for your loved ones, planning an estate can be overwhelming. However, something you may not have considered is if you can name a trust as the beneficiary of your retirement account. The following blog explores if this is a possibility and the pros and cons of this option. Additionally, you’ll discover the importance of discussing your options with a Pasco County, FL estate planning lawyer.
Who Can Be the Beneficiary of a Retirement Account?
Having a retirement account is incredibly important, as it allows you to put money away so you can focus on enjoying your older years after you leave the workforce. However, if you pass away with money in this account, you may not know what will happen to these funds.
As the owner of a retirement account, you can name a primary beneficiary or name multiple people to inherit the funds after you pass. You may assume that you can only name a spouse or child to be the beneficiary of the account. However, this is far from the truth. In reality, you’ll find that you can name non-people to inherit your retirement account, like a charity or trust fund. If you choose to name a trust fund, you’ll find that upon your passing, your account will be moved to the trust, and the assets will be held and managed in accordance with the terms and conditions of your fund.
What Are the Benefits and Disadvantages of This Option?
As with most estate planning options, there are advantages and drawbacks you’ll need to consider. Generally, you’ll find that one of the main benefits of this option is that it allows you to grant funds to those who may not be able to handle large sums of money responsibly, like minor children. Similarly, this can help you care for loved ones with disabilities who qualify for government benefits as the funds in the trust will not disqualify them from receiving the support they need.
However, if you want to leave the retirement account to your spouse, having it go through a trust fund first can be complex. This is because the IRS does not have a clear pathway for allowing these retirement accounts to treat these assets like their own. As such, this may not be the best option if this reflects your circumstances.
When planning your estate, it’s in your best interest to meet with an experienced estate planning attorney to discuss your wishes. They can help you explore your legal options to ensure you pick the best option for your needs. At the Law Offices of Matthew J. Jowanna, our dedicated legal team will do everything in our power to help you through these complicated issues. Connect with us today to learn more.