Who Should Be the Beneficiary of Different Accounts, Spouse, or Trust?

In this episode of Berry’s Bites, Chris Berry answers the question: We’re married, we set up a Trust, who should be the beneficiary of the different accounts, spouse or Trust?

Estate Attorney and Advisor Chris Berry of Castle Wealth Group answers questions on retirement and estate planning every Wednesday at 1pm. Register via this link or give our office a call at 844-885-4200.

Castle Wealth Group and Christopher Berry help families with estate planning, elder law, retirement planning, and tax planning from their offices in Brighton, Ann Arbor, Livonia, Bloomfield Hills, and Novi.

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Episode Transcript:

We’re married, we set up a trust, who should be the beneficiaries of the different accounts spouse or trust?

I’m going to give you the lawyer’s answer it depends it depends on what type of accounts but 95 times out of 100 here’s how it works we break accounts into two different types of accounts we have what we call qualified accounts and think of this as they have some type of tax qualification and this is going to be things like IRAs 401k for 3bs Roths so these are all qualified accounts some are pre-tax some grow tax-free but they’re all tax-qualified so with these types of accounts typically what we’re doing when we’re doing a trust is our primary beneficiary is going to be the spouse.

If we’re married contingent beneficiary is going to be the trust common question is if I name someone other than the kids as a beneficiary don’t they have to pay all the taxes at once no as long as the trust is set up correctly they still get the full stretch meaning they don’t have to pay all the taxes at once but they still get the full stretch which says that all the taxes have to be paid within 10 years and that’s due to the secure act so almost always in our office if it’s a qualified account like an IRA a 401k a 403 b 457 Roth account Roth 401k Roth ira we typically name spouse first so they can do a spousal rollover and then we name the trust as a contingent beneficiary.

Now the other type of accounts we have what we call just generally non-qualified accounts basically think of this as everything else so this would be your post-tax brokerage accounts we’ll throw life insurance in here checking accounts savings accounts money markets really basically everything else what we do is we just name the trust as a beneficiary because the trust provides for the spouse and then we’ll provide for the case so if it’s qualified spouse then trust if it’s non-qualified basically anything else we name the trust as a primary beneficiary now if we’re setting up an asset protection trust like a castle trust then instead of naming the trust as a beneficiary a lot of times we’ll have all this stuff inside of the trust other than qualified accounts because they can’t go directly into the trust again this is general advice but let’s say 95 times out of 100 this is what we recommend at the end of the day.

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