Funding Living Trust Part 1 talked
about bank accounts, part 2 discussed Brokerage Accounts,
Individual Securities and Mutual Funds. In this the final
installment, I am writing about retirement assets and life
insurance.Retirement
Assets:
You should NOT change the
ownership of an IRA, 401k, and or 403b account etc. You need to
be aware that changing ownership would constitute a withdrawal
and be a taxable event. Therefore they cannot and should not be
transferred into a living trust. When funding living trust with
these types of assets, most will leave the spouse as first
beneficiary and change the contingent beneficiary to the trust.
Even though your spouse may be the primary beneficiary of the
trust, as an individual he or she will have greater rights and
more flexibility as the primary beneficiary of the asset.
Life Insurance:
Term Life Insurance: If you are
the owner and insured of a term life insurance policy, the only
change required is to name the trustee as beneficiary with you
retaining all ownership rights unless there is some specific
reason to name another beneficiary. You do not need to change
the ownership of your term life insurance policies.
Cash Value or Whole Life
Insurance: If the policy has a cash component, then you may
wish to change ownership along with changing beneficiary to the
trust so your successor trustee has access to the cash value for
your benefit if you become disabled.
In summation of the three
articles on funding living trust:
Change Ownership to the trust
for:
- Bank Accounts;
- Brokerage Accounts;
- Individual Stocks and
Bonds;
- Mutual Funds.
Change Beneficiary to the trust
for:
- Retirement Assets; trust
as secondary beneficiary;
- Term Life Insurance.
Change Ownership and
Beneficiary to the trust for:
- Whole Life or any cash
value life insurance policy.
After reading all three of the
articles in this series, you should have a good understanding on
funding living trust. Now make sure you complete your estate
planning. Remember you don't plan your estate for yourself, but
for the ones you love.
