My wife and I are co-trustees of our living trust. The trust was just
created. I have several life insurance policies and several retirement
plans.
Would you recommend changing the beneficiaries such that:
a) my spouse is the primary and the trust is the contingent
b) the trust is the primary and there is no contingent
c) some other way ?
My attorney is recommending a), but I was wondering why that would be
preferable to b). I read somewhere that a spouse receives "favorable"
treatment when named as the beneficiary of an IRA/Roth IRA account as
opposed to having the trust as the beneficiary, but it did not elaborate.
Thanks for any assistance.
Charlie
I used to know this one, but it's been about ten years.
For retirement plans, I think spouses have the most flexibility.
They can roll over plans and continue to defer the taxes. Thus
you want your spouse to get the IRAs.
For life insurance, I don't think it matters much. No federal
income taxes, but the proceeds are considered part of your
estate for estate tax purposes no matter a) or b). If your
spouse is the beneficiary, then she can always disclaim the
proceeds in favor of the trust; if your trust is the beneficiary,
then your spouse is the trustee.
I assume your trust splits upon the death of the first of you,
so that you each can keep your estate tax exemption. If your
wife is the beneficiary, and you die first, then the proceeds are
hers. She can die with the life insurance money going to her
estate, instead of the trust. Wouldn't that mean probate?
Couldn't that defeat the split?
Ask your lawyer. Please post back his explanation.
