Re-Titling Assets

Usually, after everything is signed and the client has their new plan, most clients think their done… Far from it. Most plans require attending to re-titling certain of the client’s assets. Which assets to re-title and how to do so seems a constant source of confusion for some of lesser-experienced planning attorneys (read: those who don’t do this all the time), so over the next few posts I will try to summarize what assets get re-titled and how they should be re-titled. To avoid this getting too complicated I’ll just be talking about “trusts” as if all were the same. Of course nothing is this simple and more specific attention should be paid to be sure the plan you have just drafted will work:

Retirements Accounts (Defined contribution plans, Defined benefit plans, Hybrid and Cash Balance Plans, Requirement of Permanence, Qualified retirement plans, SIMPLE IRAs, ROTH IRAs, SEP IRAs, 401ks, 403Bs, ‘HR 10’ or Keogh Plans, Non qualified plans, etc…

Again, it can depend on the specific kind of plan and the specific trust at issue (talk to your nearest trusted estate planning attorney), but usually these are not re-titled into your trust. Many trusts are set up as probate avoidance vehicles, however, because most of these plans, whether qualified or not, use beneficiary designations that allow them to pass outside of probate anyways, it is not necessary to re-title them into the trust. Furthermore, not all trusts are drafted to give the necessary discretion to the Trustee/Beneficiaries to allow the trust to be “treated as a person” by the IRS such that re-titling them could prevent the young beneficiary from using their life as the measuring life for distributions from certain qualified plans.

Jennifer N. Sawday of the California Estate Planning Blog says:

If your attorney suggests that you do this and you have a spouse or children who could survive you — ask why they are recommending this.

It could be that your attorney is not experienced in estate planning and does not know what should or should not be titled into your Living Trust.

Generally, retirement accounts are not subject to probate because you can name beneficiaries. And by naming your spouse or children as beneficiaries, you are allowing them the most flexibility in dealing with transferring your retirement accounts when you die including the option to rollover the retirement account.

Otherwise naming your Living Trust as a beneficiary may have dire tax consequences to your beneficiaries if it remains held in your Living Trust when you die.

Well said Jennifer, and thank you.

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