Setting up a trust - should I make it my beneficiary?

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EdB
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Setting up a trust - should I make it my beneficiary?

Post by EdB »

My wife and I are setting up a trust to make inheritance easier and bullet-proof for our kids and grandkids. We are getting the trust written so as to cover every imaginable contingency. I have an IRA and a brokerage account in Vanguard. Should I make that trust the beneficiary of both my accounts? It seems like that would consolidate things and make it simpler all around, but maybe I'm the one being simple here. I just want to make things as easy and clear as possible, and want the investments to move into the trustee's hands in the smoothest possible fashion.
HomeStretch
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Re: Setting up a trust - should I make it my beneficiary?

Post by HomeStretch »

If you have engaged an attorney to draft the trust agreement, the attorney should be advising you on the appropriate primary and contingent beneficiary designations.

When spouse and I set up our trusts, our estate and trust attorney advised us in writing as to the beneficiary designations and asked us to provide her with copies of the updated designations for her files.
Katietsu
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Re: Setting up a trust - should I make it my beneficiary?

Post by Katietsu »

With a trust that includes detailed directions and contingencies, I assume that you have a highly skilled trust attorney knowledgeable about your state law and your personal trust. Is there a particular concern that would lead you to ask this question here?
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EdB
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Re: Setting up a trust - should I make it my beneficiary?

Post by EdB »

HomeStretch wrote: Tue May 11, 2021 3:14 pm If you have engaged an attorney to draft the trust agreement, the attorney should be advising you on the appropriate primary and contingent beneficiary designations.
We are working with a specialist legal office who are holding our hands through the whole thing. There is a lot of brain power in this forum, but I am not going to do anything based solely on what I get here. I just value any information or real-life experience anyone may have to offer. Just trying to learn.
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EdB
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Re: Setting up a trust - should I make it my beneficiary?

Post by EdB »

Katietsu wrote: Tue May 11, 2021 3:57 pm With a trust that includes detailed directions and contingencies, I assume that you have a highly skilled trust attorney knowledgeable about your state law and your personal trust. Is there a particular concern that would lead you to ask this question here?
Oh certainly, we are working with a highly-regarded legal office that specializes in wills and trust. I just value input from people who have been down that road, as part of the learning process. We have more meetings scheduled, and the more I can tell them about Vanguard, the better they can help me.

Thanks for the response.
mx711yam
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Re: Setting up a trust - should I make it my beneficiary?

Post by mx711yam »

My trust attorney kept all iras out of the trust, all brokerage accounts and non retirement accounts were put in the name of the trust immediately. This was in texas.
Last edited by mx711yam on Tue May 11, 2021 8:16 pm, edited 1 time in total.
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retired@50
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Re: Setting up a trust - should I make it my beneficiary?

Post by retired@50 »

EdB wrote: Tue May 11, 2021 3:04 pm I have an IRA and a brokerage account in Vanguard. Should I make that trust the beneficiary of both my accounts?
As I understand it, making a trust the beneficiary of an IRA doesn't really accomplish much. Eventually, this money will have to be re-directed to Inherited IRA accounts, unless your wife survives you, and she can roll it into her own IRA. The main point is that someone is going to have to pay taxes on it when the money is withdrawn, and trust tax rates are worse than personal income tax rates.

I'd approach the issue by making your wife your IRA beneficiary (and you the beneficiary of her IRA), and kids and/or grandkids as secondary beneficiaries, just in case you and your wife die at the same time.

Regards,
Last edited by retired@50 on Tue May 11, 2021 9:15 pm, edited 1 time in total.
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EvelynTroy
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Re: Setting up a trust - should I make it my beneficiary?

Post by EvelynTroy »

mx711yam wrote: Tue May 11, 2021 7:34 pm My trust attorney keep all iras out of the trust, all brokerage accounts and non retirement accounts were put in the name of the trust immediately. This was in texas.
Same procedure for me in Missouri.
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FrugalInvestor
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Re: Setting up a trust - should I make it my beneficiary?

Post by FrugalInvestor »

EdB wrote: Tue May 11, 2021 4:50 pm
Katietsu wrote: Tue May 11, 2021 3:57 pm With a trust that includes detailed directions and contingencies, I assume that you have a highly skilled trust attorney knowledgeable about your state law and your personal trust. Is there a particular concern that would lead you to ask this question here?
Oh certainly, we are working with a highly-regarded legal office that specializes in wills and trust. I just value input from people who have been down that road, as part of the learning process. We have more meetings scheduled, and the more I can tell them about Vanguard, the better they can help me.

Thanks for the response.
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Kevinaom
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Re: Setting up a trust - should I make it my beneficiary?

Post by Kevinaom »

This is all very state specific so I would not follow any advice here except do as you estate attorney tells you to do. In Florida for example, it is highly recommended to keep your real estate out of the trust. In Georgia, people put it into trust.

As someone here stated, your trust attorney will give you a document that tells you exactly what to do with everything. I followed it to the letter of the law.. no deviations.
HomeStretch
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Re: Setting up a trust - should I make it my beneficiary?

Post by HomeStretch »

EdB wrote: Tue May 11, 2021 4:47 pm
HomeStretch wrote: Tue May 11, 2021 3:14 pm If you have engaged an attorney to draft the trust agreement, the attorney should be advising you on the appropriate primary and contingent beneficiary designations.
We are working with a specialist legal office who are holding our hands through the whole thing. There is a lot of brain power in this forum, but I am not going to do anything based solely on what I get here. I just value any information or real-life experience anyone may have to offer. Just trying to learn.
What type of trust are you setting up?
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FrugalInvestor
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Re: Setting up a trust - should I make it my beneficiary?

Post by FrugalInvestor »

Kevinaom wrote: Tue May 11, 2021 8:47 pm As someone here stated, your trust attorney will give you a document that tells you exactly what to do with everything. I followed it to the letter of the law.. no deviations.
Yes, my attorney even did all the retitling that his office could do and gave me instructions for what they could not do. When questions occasionally crop up about anything he will answer an email from me and he has even intiated a call once when he felt that would work better. I've never seen a bill for any of the questions. Our son knows how to retrieve the estate documents and has the attorney's name and number. We've told him to check with the attornery before doing anything.
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Mullins
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Re: Setting up a trust - should I make it my beneficiary?

Post by Mullins »

No doubt your attorney will ask you to list the assets which will fund the trust on "Schedule A" of your trust.
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bsteiner
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Re: Setting up a trust - should I make it my beneficiary?

Post by bsteiner »

Is there a reason you don't want your wife to be the beneficiary of your IRA?
Topic Author
EdB
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Re: Setting up a trust - should I make it my beneficiary?

Post by EdB »

Thanks to all for the replies. This was obviously a deep question with no standard answer.

After some discussion with the trust attorney, I am making my spouse the primary beneficiary of both Vanguard IRA and brokerage accounts, which I guess is pretty obvious. I think their advice is to make the trust the secondary beneficiary of both accounts, which would dispose of the assets in the same manner as if both wife and I died at the same time. The trustees can then sort things out, as spelled out in the way the trust is written.

Probably about the best I can do from where I'm standing now.
RubyTuesday
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Re: Setting up a trust - should I make it my beneficiary?

Post by RubyTuesday »

bsteiner wrote: Wed May 12, 2021 12:08 pm Is there a reason you don't want your wife to be the beneficiary of your IRA?
Our trust attorney provided detailed memo on titling and transferring assets relative to the trust. For our IRAs and qualified retirement accounts, he suggested we have our respective spouse as primary beneficiary and our DAF as secondary (no children)
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Watty
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Re: Setting up a trust - should I make it my beneficiary?

Post by Watty »

If you wanted to leave the retirement accounts in a trust because of some situation like you have a kid who would squander the money then it can be done but it needs to be done just right.

The problem(as I understand it) is that if it is not the right type of trust and the beneficiary is not named just right then that is a problem since normally an IRA can only be owned by an individual. If it is not done just right then the trust might be required to withdraw all the money from the IRA since a trust is not an individual.

I know of a situation where this was an issue and a lawyer had to be paid get it straighten out and have the inherited IRAs for the beneficiary's created. It was fixed Ok but for a while it was not clear if it could be fixed or not.

Anyway if you do this be sure that it is done exactly the way that your lawyer tells you to.
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Lee_WSP
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Re: Setting up a trust - should I make it my beneficiary?

Post by Lee_WSP »

If you're hiring an attorney, the simple answer is to do as they say. Therefore, I'm not sure what answers you are seeking.
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