Ali discusses how to distribute your retirement assets through your trust…(read more)

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Are you considering putting your 401k plan into your trust? While it may seem like a logical move, there are certain considerations you need to take into account before doing so.

First and foremost, it’s important to understand the purpose of a trust. A trust is a legal entity that allows assets to be managed by a trustee for the benefit of the trust beneficiaries. By putting your 401k plan into a trust, you are essentially transferring ownership of the plan to the trust. This can have significant tax implications and may not be the best choice for everyone.

One potential benefit of putting your 401k plan into a trust is that it can provide greater control over how your assets are distributed after your death. This is because the trust can dictate how and when the assets are distributed, whereas a traditional beneficiary designation only allows for a lump-sum distribution.

However, there are also potential downsides. For example, transferring ownership of your 401k plan to a trust can trigger a taxable event. Additionally, if you place your 401k plan into an irrevocable trust, you may lose control over the assets and may not be able to change the terms of the trust if your circumstances change.

Another important consideration is the potential impact on your eligibility for certain tax benefits. For example, if you are over age 70 ½, you are required to take annual required minimum distributions (RMDs) from your 401k plan. If the plan is owned by a trust, you may not be eligible for certain tax benefits related to RMDs.

In general, putting your 401k plan into a trust can be a complex and potentially risky move. Before making any decisions, it’s important to consult with a trusted financial advisor or estate planning attorney who can help you fully understand the implications of this choice and how it may impact your long-term financial goals. Good luck!