Results 1 to 2 of 2
  1. #1
    Join Date
    Oct 2014

    Default Establishing Trust to Designate Minor Overseas As 401k Beneficiary

    Not sure if I'm asking this question in the right category. So I'd like to designate a nephew and 2 nieces who are minors but live overseas as my 401K beneficiaries. I hear though that in the event something happens to me, 401K money are held until the beneficiaries turn 18. I read somewhere something about establishing a trust where a designated guardian of beneficiaries can use the inheritance any time as long as it's for the beneficiary's sake or however way I specify. Mind clarifying how establishing a trust works? Is it as complicated as rocket science enough to consult a lawyer or some financial advisor? Or is it something I can figure out if I research and read the right sources about establishing trust?

  2. #2
    Join Date
    Mar 2013

    Default Re: Establishing Trust to Designate Minor Overseas As 401k Beneficiary

    It's complicated. Depending on how much money is involved and how young the minors are at the time of your death it could get even more complicated and expensive.

    So, how old are you? How much money is involved? How old are the minors? Do they all share a common parent?

    Answering those questions may get you some helpful tips.


    You may be able to designate a trust as the beneficiary of your 401(k) retirement account. Leaving your account to a trust provides control over your assets when you die, ensuring the money will go where you want it to go. But there are rules and considerations to heed before designating a trust to receive your 401(k) legacy.
    Employer's Option

    Check your plan’s rules regarding naming a trust as your 401(k) beneficiary. The Internal Revenue Service's 401(k) rules let employers prohibit trusts from receiving periodic 401(k) payouts that are spread over the life expectancy of the trust’s beneficiaries. Many employers with 401(k) plans have exercised this option. It means the entire balance of the 401(k) will be turned over to your designated trust within one year of your death, which makes all deferred taxes due in the year the money is paid. If your employer’s plan does not permit life-expectancy payouts to a trust for its beneficiaries, consider rolling over the 401(k) account to an individual retirement arrangement or IRA that does allow this.
    Trust Beneficiaries

    If your 401(k) plan permits life-expectancy payouts to a trust for beneficiaries, there are IRS rules you must heed in setting up the trust. The beneficiary of the trust must be a person or people. You can’t use a trust to leave your 401(k) assets to a charity, your church, your estate, another trust or any other entity. The IRS requires that 401(k) assets turned over to a trust must be distributed to the trust’s beneficiaries in minimum annual installments calculated according to the expected lifetime of the oldest beneficiary. Human beings have a finite life expectancy but an entity like a charity does not, so there is no way to figure a required minimum annual distribution to an entity.
    Other Considerations

    If you can designate a trust with life-expectancy payouts as your primary 401(k) beneficiary when you die, you must also designate a secondary beneficiary who will receive the assets remaining in your account when the primary beneficiary dies. The secondary beneficiary must also be a person, not an entity. The secondary beneficiary has no claim on the assets so long as the primary beneficiary is alive. To be valid as a 401(k) beneficiary, the trust also must be valid under your state’s laws, its terms must become irrevocable upon your death, the trust’s beneficiaries must be people named in the trust document, and the participant must file a copy of the trust document with the 401(k) plan administrator.
    Will Doesn't Count

    The provisions in your will don’t count when distributing 401(k) assets after your death. Under IRS rules, the only document controlling disposition of your 401(k) assets is your beneficiary designation form. Your will cannot override the designation of a beneficiary on that form. If you don’t fill out a beneficiary designation form, half the money in your 401(k) account automatically goes to your spouse, if you are married, and the rest of the money will end up in your probate estate by default. Your spouse and the estate may owe all deferred taxes on the money in the year the money was paid.

    1. Sponsored Links

Similar Threads

  1. Trusts: How to Designate a Testamentary Trust as a Beneficiary of Financial Accounts
    By moormansd in forum Estate Planning, Administration and Probate
    Replies: 2
    Last Post: 09-28-2017, 01:22 PM
  2. Trusts: Non Trust Asset Moved into Trust by a Beneficiary with Power of Attorney
    By Dancer1629 in forum Estate Planning, Administration and Probate
    Replies: 4
    Last Post: 08-15-2015, 01:57 PM
  3. Living Wills: Using a Trust to Name Minor As Life Insurance Beneficiary
    By DEO2483 in forum Estate Planning, Administration and Probate
    Replies: 4
    Last Post: 03-25-2014, 05:49 PM
  4. Trust Administration: Can a Beneficiary Buy Another Beneficiary's Interest in Property Held in Trust
    By volleybum in forum Estate Planning, Administration and Probate
    Replies: 8
    Last Post: 09-15-2013, 10:08 AM
  5. 401k Beneficiary
    By candg918 in forum Tax Law
    Replies: 4
    Last Post: 10-14-2007, 05:46 PM
Sponsored Links

Legal Help, Information and Resources