When planning for one’s estate, there are many considerations to remember. For instance, some Arkansas residents may think that if they are using trusts that it makes sense to move any and all assets over to the accounts. While ensuring that a trust is funded is certainly necessary, it is important to remember that moving certain assets could have unintended consequences.
One misstep that could take place when funding a trust is for individuals to think that they should move their 401(k) or IRA into the trust. The idea may be that the trust would add protections for the asset or that the funds could more easily pass to an intended beneficiary. However, if a person changes the ownership of a retirement account to a trust, the IRS considers that a complete withdrawal of funds. As a result, individuals would have to face the tax implications and possible penalties for such an action.
If someone would like his or her retirement funds to pass into a trust after his or her passing, that person could name the trust as the beneficiary of the retirement account. Of course, this step could also have certain stipulations that need to be followed correctly. Ensuring that beneficiary designations and other details of an estate plan line up is vital.
Having concerns about the best way to protect assets and bequeath them to loved ones is understandable. Because there are so many details and potential consequences involved with moving funds and creating trusts, Arkansas residents will certainly want to ensure that they are doing everything correctly. Fortunately, experienced estate planning attorneys can help interested parties understand the best ways to address specific assets.