VanNess & VanNess, P.A.
352-436-4333

Should my retirement account go into a living trust?

 

Retirement planning often overlaps with estate planning. Your age, how much money you have in your retirement account and they type of retirement you have can all play a part in the amount you will leave to your loved ones when you pass away.

A living trust, among other ways, is one option to consider.

 

 

What is a living trust?

When an individual creates a trust, they effectively transfer certain assets into a trust with stipulations on how and to whom property or assets, like retirement funds, are distributed when they die.

The grantor names a trustee, who is the individual tasked with carrying out the provisions outlined in the trust. The benefits of a living trust mean the creator maintains control over the property until he or she dies.

There are a couple of pros involved with creating a living trust to consider.

Taxes

Every time there is an exchange of money, Uncle Sam is waiting to take a share.

Depending on the type of retirement account you have, when you loved ones inherit the assets, they could be looking at steep capital gains taxes or other liabilities—if there’s no trust established.

By creating a trust, you may be able to help your loved ones avoid or limit the amount they pay in taxes.

Probate

Probate is the process that involves administering an individual’s estate after he or she has died.

Tallying debts, like past-due taxes, and assets, and ascertaining beneficiaries all need to be completed through the probate process.

However, a trust—like a living trust—bypasses the probate process. Since property in a trust is technically owned by the “trust” and not the deceased, it does not have to be included in the estate, reducing taxes and easier access to the funds.

Determining whether a living trust is beneficial for your situation should involve the consent of a professional knowledgeable in this legal area.

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