[Tommy]

I helped my father set up a trust and he’s going to move his house into it.

The Trust and Will website suggested NOT moving retirement accounts in to the trust, preferring to leave those accounts to go through the beneficiary process.

Those are pretty much all of his assets. Is there anything else he should do in terms of tax planning when it comes to inheritance down the road for tax efficiency?

Do you have any good articles to recommend on the topic?

[Jule]

You can add the trust as beneficiary and some people do in order to have better control on the inheritance disbursement.

The down side is that it looks as withdrawals and creates a major tax event.

That’s why many people prefer not to do it.

[Brian]

It’s not a suggestion. It’s a legal requirement. You can’t put retirement accounts in a trust as retirement accounts by definition are individual accounts.

You can name a trust as the beneficiary of a retirement account though there are cons to doing that as well.

[Jeff]

Get a durable power of attorney in case he becomes incapacitated and you need to handle certain day to day things.

Like write a check from his bank account, or act as him in financial matters.

[Joel]

I would also put any checking, brokerage or other after tax accounts in the trust.

From a tax savings perspective, the a Revocable Trust is a discarded entity and will not lower taxes.

You might encourage your father to consider other tax savings strategies (e.g. Roth Conversions, Charitable Giving, Tax Gain/Loss Harvesting etc.).

[Nicholas]

Just went through the estate planning process. Correct that can’t place retirement accounts into the trust but naming it as the beneficiary is helpful to control how the funds are then utilized.

Depending on your state, would review what the specific state exemptions are.

Some states are as high as the federal but others are a couple of million so may make sense to utilize the gift tax exclusions each year for larger estates.

[Mike]

As a side note:
Nothing you’ve done changes anything about taxes or “tax efficiency”.

Having his home in a trust doesn’t change taxes for either him or the trust beneficiaries.

[Jeff]

Trust and will advice is very standard and correct on this. Retirement accounts can’t be held in the name of the trust and it’s not ideal for them to be passed to a trust when your dad passes away.

Much better if you and/or other responsible adults will be beneficiaries to use beneficiary designations to allocate the funds at his passing.

This streamlines estate administration by avoiding probate because of beneficiary designations bypass the probate process (which is the primary reason you put the home in the trust).

[Author]

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