Attorney Tom Olsen is host of the Olsen on Law Radio Show on in Orlando. Tom has been answering legal questions on his radio show for over 35 years and has been practicing law in Orlando for 40 years.
The Olsen on Law Radio Show is America’s longest running legal radio show.
Produced by Professional Media Ideas. Call or text Chrissy Merrill at 321-207-8384 or by email at chris@olsenlawgroup.com

Transcript:
Tom: Let’s go to Linda in Orlando. Linda, you’re on WDBO. Go ahead.
Linda: Yes. Hi. Good morning. I have a revocable living trust and I had put my IRA beneficiaries as the revocable living trust, but I want to change that.
Tom: All right.
Linda: If I do it on the Fidelity website, do I have at the same time go back to the actual document and do that too?
Tom: Linda, when you pass away, what happens to your 401k is not going to be governed by your will or trust, it’s going to be governed by how you fill out the beneficiary designation form. If you go to Fidelity and let’s say you’ve got three kids and right now you’ve got the trust as a beneficiary of your 401k, if you change that to your three kids, that Fidelity form will be controlling no matter what your trust happens to say.
Linda: Okay, perfect. That’s what I was looking for. [chuckles]
Tom: Linda, what I’m saying is that you can change your beneficiary with your Fidelity and that in and of itself would not require you to change your trust. Is that what you’re going to do, Linda, is make your children a beneficiary of your 401k?
Linda: Right, yes.
Tom: Linda, that is a better choice because by making your children to the direct beneficiary 401k, they can roll that over into their own beneficiary IRA, and avoid paying taxes over whenever and they can pay taxes over the next 10 years, rather than having one lump sum due in the year that you pass away.
Linda: Right. That’s what I figured out after. [chuckles]
Tom: Yes. Linda, that’s a good strategy. We appreciate your calling. Do you have any other questions?
Linda: No, that’s it. Thank you for your help today.
Tom: Okay. Naming your adult children as the beneficiary of your IRA or 401k is always a better choice. When do you name the trust, the beneficiary of your IRA or 401k? When you’ve got minor children, you’ve got spendthrift children, that would be reasons that you want everything flowing through your trust. When you’ve got minor kids, have spendthrift kids that are not getting their share outright.
Chris: Or addiction.
Tom: Yes, addiction issues, exactly.
[00:02:14] [END OF AUDIO]…(read more)

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When it comes to planning for your retirement, it is important to consider all of the options available to you. One such option is a revocable living trust, which is a legal document that outlines how your assets will be distributed after your death. One question that often arises is whether you should make your revocable living trust the beneficiary of your IRA, 401k, or retirement account. The answer is that it depends on your individual circumstances.

One of the main benefits of making your revocable living trust the beneficiary of your IRA, 401k or retirement account is that it allows you to bypass probate. This means that the assets in your retirement account will pass directly to your beneficiaries without having to go through the probate process, which can be time-consuming and expensive. Additionally, if you have multiple retirement accounts, making your revocable living trust the beneficiary can help you consolidate your assets and simplify your estate planning process.

Another advantage of using a revocable living trust as the beneficiary of your retirement account is that it provides greater control over how your assets are distributed after your death. You can specify in the trust document how you want your assets to be divided among your beneficiaries and under what circumstances. This can be particularly useful if you have concerns about how your beneficiaries will manage their inheritance or if you want to make sure that certain assets are used for specific purposes such as education or charitable contributions.

Another consideration is taxes. If you leave your retirement account to an individual beneficiary, they will be required to take mandatory withdrawals based on their life expectancy, which may result in a higher tax bill. However, if your revocable living trust is the beneficiary, you can control the distribution of the assets and potentially reduce the overall tax liability.

On the other hand, there are some potential downsides to making your revocable living trust the beneficiary of your IRA, 401k, or retirement account. One is that you may lose some flexibility in how you can manage your retirement assets. For example, you may not be able to make changes to your distribution plan once it is in place without going through the legal process of amending your trust document.

Additionally, there may be more complexity and administrative work involved in managing a revocable living trust as the beneficiary of your retirement account. Your trustee will need to work with your financial institution to ensure that your assets are properly titled and managed to align with your wishes.

In conclusion, whether you should make your revocable living trust the beneficiary of your IRA, 401k, or retirement account depends on your unique circumstances and goals. Consulting with an experienced estate planning attorney can help you determine whether this strategy is right for you and ensure that your estate plan is structured in the most effective way possible to achieve your objectives.