By Terry Savage on August 29, 2019 | Financial Planning / Retirement

If an IRA or 401k goes to beneficiary upon death and should not be included in a revocable trust, couldn’t all accounts be setup with beneficiarys instead of having a revocable trust? If a revocable trust is the only way to avoid probate, then what about the IRA/401K that is not part of the trust?

Terry Says

Certain investments allow beneficiaries.  You definitely should name a beneficiary for your retirement accounts and life insurance policies —  and keep the list of beneficiaries current.

You can title a CD in several ways, either joint tenancy with rights of survivorship, or even POD– payable on death.

BUT — what happens if you are ALIVE and incapacitated?  That’s where the Revocable Living Trust designation is helpful.  It allows your named successor trustee to withdraw money from a bank account (perhaps to pay for your care) or otherwise deal with your assets in the manner you have directed in the trust documents.    That’s why it’s important to choose your successor trustee wisely!

So the issue of financial planning does not begin at death — the naming of your accounts inside the trust, ,and of major assets such as your home — gives flexibility in case you cannot act for yourself.

The retirement accounts cannot be accessed without your direct action –and do not belong inside the RLT. At death, your heirs may have the ability to stretch out the tax-deferred growth of your retirement accounts, so individual heirs should be named.

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