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Living Trust as a Contingent Beneficiary...Yes or No?

Discussion in 'Estate Planning, Creating Wills & Trusts' started by Janz Hobbs, Jun 18, 2019.

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  1. Janz Hobbs

    Janz Hobbs Law Topic Starter New Member

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    Thank you for this in depth, thoughtful response. Even though I clarified (just now) that my question was pertaining to a life insurance policy, you clarified some other things so succinctly and I appreciate this.
     
  2. zddoodah

    zddoodah Well-Known Member

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    Whether or not you list the trust or each other as beneficiaries on a life insurance policy makes no difference in terms of probate since life insurance proceeds are not part of the deceased's probate estate. "Tax_Counsel" can opine about any tax differences between the two. However, since life insurance proceeds are not generally taxable, I doubt it makes much difference.

    P.S. As far as what your "financial planner" told you, when my sister died 12 years ago, her trust was designated as beneficiary on all financial accounts, including a life insurance possibility. Those designations caused no problems and, in fact, made it easier for me as successor trustee of the trust.
     
    Janz Hobbs likes this.
  3. Tax Counsel

    Tax Counsel Well-Known Member

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    Generally nothing wrong with making the trust your beneficiary on a life insurance insurance policy that you own. The tax treatment will be the same and what goes to the trust is simply cash that the trust can disburse.

    Where it can be problem, however, is with retirement assets like 401(k) accounts, annuities, etc. Giving them to a trust when you die may accelerate the required time period for distribution of the account, which means accelerating and perhaps increasing the taxes paid by the beneficiary on them. For these I would generally agree it's better to designate beneficiaries directly, at least when those beneficiaries are individuals.
     
    Janz Hobbs likes this.
  4. John Hazelwood

    John Hazelwood New Member

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    A trust would be wise, in my opinion.
     
  5. justblue

    justblue Well-Known Member

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    Stop posting to dead threads.
     
  6. zddoodah

    zddoodah Well-Known Member

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    And if you are going to resurrect dead threads, at least say something intelligent. Given the level of complexity of the discussion in this thread, saying, "a trust would be wise," is utterly useless.
     
    Red Kayak likes this.

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