When planning your estate, there are several considerations you’ll need to make, from picking which kind of Will is right for you to creating a Trust Fund to protect your assets. However, something you may be surprised to learn is that you can name a Trust Fund as the Beneficiary of a retirement account. If this is something you’re interested in, you’ll want to keep reading to learn more about this option, the benefits and disadvantages, and why it’s in your best interest to connect with a Medina, Ohio estate planning lawyer who can help guide you through these challenging times.

Is It Possible to Name a Trust as a Retirement Account Beneficiary?

Your retirement account is crucial, as it can help provide much-needed financial security after you leave the workforce. However, if you pass away with money in this account, understanding what happens to it is critical. Generally, you’ll name at least one Beneficiary to inherit the account upon your passing, like your spouse or children.

However, many are surprised to learn this is not their only option. It is possible, though uncommon, to name a Trust Fund as a Beneficairy of a retirement account. As such, the assets held in the account would be transferred to the Trust upon the account owner’s passing, and treated as an asset of the Trust Fund.

What Are the Advantages and Drawbacks of This Option?

Like any aspect of estate planning, there are pros and cons to naming a Trust the Beneficiary of a retirement account. Generally, one of the main reasons people choose this option is because it grants more control over how these assets are distributed. For example, if you create and name the Trust for your minor children, you can create terms and conditions about how the funds for your account are to be used. This can help ensure the funds are used responsibly rather than granting someone large amounts of funds they may be unable to handle.

However, one of the downsides is that this can have negative impacts on your spouse. This is because there currently is no clear method for a spouse who receives retirement account funds via a Trust to treat the money as their own. In fact, they may be taxed on the funds and forced to obtain them all at once.

Finally, you must also consider the five-year and ten-year payouts as dictated by the Treasury Department. Essentially, this means that if your Beneficairy is not a person, but a Trust Fund, charity, or other option, it must be paid within five years of the account owner’s death.

As you can see, there are many considerations you must make if you’re interested in this option. That’s why it’s in your best interest to connect with an experienced estate planning attorney from Krause Law. Our team can help you explore your estate planning options so you can feel confident selecting the best option for your needs. Connect with us today to learn more.