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BGP writes:

<<I have heard but have not been able to verify that if the beneficiary of a 401K or IRA is worded such that the trust is the beneficiary for the benefit of someone then the person who benefits can be considered as inheriting the 401k. Something to like "Family Trust for the benefit and welfare of XXXXXX" is sufficient to pass the 401K or IRA into the trust and shelter the funds from lump sum distribution.

I am not sure of this though. And will be hoping to confirm how this done some time soon.>>


The rules for an IRA and a 401K are similar in that regard. In essence, five rules must be met and you should seek the services of a skilled estate planning attorney in ensuring they are. Otherwise, all proceeds end up being taxed immediately in their entirety. The rules are:

a. The trust is valid under state law.
b. The trust is irrevocable.
c. The turst's beneficiaries are identifiable under the termsx of that trust.
d. Within nine months of the employee's death, a copy of the trust is provided to the plan.

Be aware that this is NOT a do-it-yourself election. You WILL require the services of a skilled estate planning attorney. If you think otherwise, then your heirs will end up paying taxes they need not pay.

Regards..Pixy
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