Estate Planning and your Retirements Accounts

I have been receiving a lot of great questions from my clients about their retirement accounts (IRA, 401(k), 403(b)…).  Their financial advisors are telling them to not name their MH trust as the beneficiary.  The financial companies are trying to help my clients with legal advice, and it tends to confuse things (but it does show that there are lot of attorneys who really don’t know what they are doing).

The basic premise of what they are telling my clients is: “You don’t have to worry about probate, because there is a beneficiary designation.”

This is true, at the base level.  But that is not the only concern.  And your MH trust covers a lot more than just probate avoidance.

Whether naming a person or your MH trust as beneficiary, there would not be any additional delays or restrictions when trying to collect or roll-over the account.  The one thing the financial company may be thinking is the potential income tax effect of naming a trust – there is a rule that requires the trust to withdraw the balance within 5 years (thus increasing the income tax in those years.  But with your MH trust that is not a concern, because your trust is Qualified (under the IRS regulations), so the “5 year” rule does not apply.

Further, by naming the trust as the beneficiary, there is no longer a risk of probate since the trust accounts for contingencies such as someone predeceasing you or if the beneficiary is a minor.

Married couples should name each other as Primary beneficiary. Your MH trust is named as contingent (or secondary).  Single folks should simply name your MH trust as the beneficiary.

By designating your trust as beneficiary, your beneficiaries enjoy the protections of your beneficiary trust and still can “stretch” the required minimum distribution over their life expectancy.

To make sure your retirement account works with your estate and maximizes the available protections, schedule an appointment to talk with one of our attorneys.

Contributed by MH Albuquerque and Santa Fe Estate Planning Attorney, James P. Plitz.

What the Attorneys of Morris Hall Can Do For You:
The attorneys at Morris Hall have 100’s of years of combined experience ensuring that families’ assets are protected from probate, unnecessary taxes, creditors, ex-spouses and Medicaid spend-down.  The attorneys also help those in Arizona and New Mexico to apply for and receive Medicaid assistance and Veterans Benefits.  Our Arizona offices are located in Phoenix, Mesa, Scottsdale, Cave Creek, Tucson, Prescott, Flagstaff and Arrowhead.  Our New Mexico offices are located in Albuquerque, Las Cruces and Santa Fe.  Contact us today at 888.222.1328 to schedule an appointment!

This blog should be used for informational purposes only.  It does not create an attorney-client relationship with any reader and should not be construed as legal advice.  If you need legal advice, please contact an attorney in your community who can assess the specifics of your situation.