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trusts wills beneficiaries EVERYONE PLEASE READ THIS!

By Terry Savage on September 28, 2019 | Wild Card

Dear Terry:

I have a trust and will however I keep getting conflicting advice about how to designate financial assets. I have bank account should they be in trust or should I list individuals as beneficiaries? I have an inherited IRA and personal IRA which is named to the trust. I have life insurance named to my trust I have my home in the trust and not sure what to do with my will. What is the purpose of a will vs. trust? Do I just attach a personal letter for certain personal effects and if I don’t do they all go into the trust? What about cars? thank you

Terry Says

Oh, wow. You seem to have it all backward!  Here are the basics. I’m assuming you created a REVOCABLE LIVING TRUST and a “pour-over” will to distribute assets that do not have a named beneficiary and are not titled in the trust. Let’s agree on that. If so, there are three categories:

  1.  Assets that give you the opportunity to name a beneficiary.  Those include life insurance and retirement accounts.  It is ok to name your RLT  as the beneficiary of your life insurance policy because the successor trustee you named for your RLT will follow your instructions that you specified in the trust to distribute the proceeds after your death.

BUT you should name an individual beneficiary for each IRA (or perhaps have 2 or 3 individual beneficiaries) because they will have an opportunity to stretch out the tax-deferred growth of the IRA over their lifetime.  Same thing for your inherited IRA.

This is a nice extra to this gift. Your IRA custodian will give you a form to sign, naming a new beneficiary  that’s easy!

2. All other asset that have a “title” should be retitled in the name of your RLT. That includes your home, your bank accounts, and any Investment accounts that are NOT in an IRA.

There is no tax consequences to retitling these assets.  But you will need copies of the relevant pages that establish the RLT to show to your bank. Your estate planning attorney can give you those documents, usually 2-3 pages. You’ll need a set for each titled asset.

Make sure Your attorney re-titled the house in the name of your trust. Or you can take the documents to the title company. There should be no cost, or a small filing fee

3.  Then everything “else” — your car, clothing, personal effects” will be given through your pour-over will to your RLT to be distributed.  THe RLT is where you include legal instructions about personal property (ie., my niece gets grandma’s wedgewood china, my nephew gets any car I own at death).  Make sure your attorney writes these into your RLT instructions.

The only separate letter you should leave is one detailing your funeral wishes.  Leave it where it can be found easily, along with your living will (end of life treatment wishes) and healthcare power of attorney, of which you should give copies to your doctor.

Then it’s all up to your named successor trustee to handle things after you’re gone. PLEASE FIX THIS STUFF NOW OR IT WILL BE AN EXPENSIVE AND TIME CONSUMING NIGHTMARE FOR YOUR HEIRS!

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