Revocable Living Trust - What to include in it?

[duffer]

My atty's rule of thumb is put your "assets" in the trust, leave the liabilities in joint or indv names, outside of the trust.

ANY "qualified" account (IRA's 401k's, 403B's, 457 plans, etc) and any other qualified plan that has a beneficiary designation should not (nor can it) go into the trust. Some people make the Trust a beneficiary of the IRA/401k, which is questionable for tax reasons.

 

[Sigarms]

I’m surprised you put 401k assets in a Trust.

If you retitled the 401k from your name to the Trust name there could be tax issues. I’ve always been told 401k assets need to be separate - outside the Trust.

I stand corrected... our Trust was only listed as the primary beneficiary of the 401K in case of our death, this was the advice our lawyer gave us.

So no, the 401K is not in the Trust. Sorry for misspeaking.

 

[California]

What I've read is IRA's(etc) are considered sold, cashed out, and taxable in full, upon death if the beneficiary is a Trust.

In contrast, IRA beneficiaries can spend down the inherited IRA over ten years paying tax only on the amount liquidated each of those years, if the IRA passes to them outside the Trust.

 

[9973720wb19]

it seems to have all or most transactions going through a trust is more of a tax and accounting play than legal. I believe at the end of each tax year, you'd have a choice to take a distribution from the trust and pay the taxes on the personal level or leave the proceeds in the trust and have the trust pay the taxes. You can make that decision each year based on what why would be less in taxes.

 

[ponytug]

it seems to have all or most transactions going through a trust is more of a tax and accounting play than legal. I believe at the end of each tax year, you'd have a choice to take a distribution from the trust and pay the taxes on the personal level or leave the proceeds in the trust and have the trust pay the taxes. You can make that decision each year based on what why would be less in taxes.

That's not the case with most trusts that I have experience with, but I'm not a trust attorney.

If you inherit an IRA as a non-spouse, of age individual, there is a ten year draw down from the death of the last trust holder, with required minimum distributions, like other IRAs, but those RMDs and the ten year clock start at the death. Like any withdrawal from an IRA, you can decide when and how much, though for inherited IRAs, the penalties can be 25% of what should have been withdrawn.

All the best,

Peter

 

[ericm979]

Ah I see you've dealt with Wells Fargo!

Bank of Satan.

It took the local branch 9 months to close my mom's account after she passed. It was like they'd never dealt with a deceased person before. Every time I talked to them I got a different answer and was sent to a different person.

Similar bad dealing on 95yo Mom's, and FIL's accounts. I intercepted and prevented several new WF credit cards that Mom never ordered, after she asked me to investigate a $75 'protecting your credit' monthly fee that appeared on one of them. FIL had five new WF cards open that my wife shut down. He said he had never requested them and was baffled with all the monthly statements he received. That unrequested cards issue for elders made the papers a year later and WF paid some substantial fines.

They sold Mom some bogus "life insurance" that was charged directly out of her account. When I asked the bank for help identifying the mystery charges they would not lift a finger. I finally found out enough to figure out who they were but by then she'd passed. Of course they refused to pay out.

Companies who prey on old people like that need to have their executives jailed and their personal assets seized. Not some piddly fines that the shareholders pay.

 

[9973720wb19]

That's not the case with most trusts that I have experience with, but I'm not a trust attorney.

If you inherit an IRA as a non-spouse, of age individual, there is a ten year draw down from the death of the last trust holder, with required minimum distributions, like other IRAs, but those RMDs and the ten year clock start at the death. Like any withdrawal from an IRA, you can decide when and how much, though for inherited IRAs, the penalties can be 25% of what should have been withdrawn.

All the best,

Peter

I'm not an estate attorney or an accountant. I believe IRAs function under separate rules from a Trust by nature. IRAs provide the same legal protection from creditors and lawsuits, but they are individual asset were a trust can have several beneficiaries. A Trust will have taxable income or loss and is required to file and pay taxes stemming from the assets held/owned by the trust. In most cases, income taxes at the trust level is higher than an individual especially if the beneficiaries are retired and have little to now income on the personal level. So the beneficiary can chose to take the distributions and pay the taxes on the personal level. If OP has income and expenses from the operations of the assets (his home and ranch and other liquid investments) owned by the trust, it all must to go through the trust because the trust now owns the house, ranch/business.

 

[MoKelly]

it seems to have all or most transactions going through a trust is more of a tax and accounting play than legal. I believe at the end of each tax year, you'd have a choice to take a distribution from the trust and pay the taxes on the personal level or leave the proceeds in the trust and have the trust pay the taxes. You can make that decision each year based on what why would be less in taxes.

I believe if it’s a Revocable Trust the creator of the Trust pays all taxes. There is no “choice”.

 

[newbury]

Wells Fargo seems to be one of the few "financial institutions" I get phishing scam from. Never even ever had an account with them.

 

[California]

I believe if it’s a Revocable Trust the creator of the Trust pays all taxes. There is no “choice”.

I think that's correct, the trust becomes its own taxable entity only after the original trustees are gone.

And getting a TIN, Taxpayer Identification Number, for the Trust is something the Successor Trustee needs to do immediately.