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Transferring assets to a testamentary trust: Can it be done?

Testamentary trusts are some of the most common kinds of trusts in estate planning, and for a very good reason. These trusts offer estate planners numerous tax-related and other benefits. Best of all, they are fairly inexpensive to create.

A testamentary trust comes with one very specific advantage: even though it is included and laid out in your estate documentation, it will not go into effect until after you die. In other words, a testamentary trust can be modified and revoked at any time prior to your death. Furthermore, it will not contain any of your assets, nor will it have to be administered by the trustee until after you have died.

Once the creator of a testamentary trust passes away, the assets that were earmarked to go into it will be transferred to the trust’s control. In many cases, this can allow for protection against creditors and tax liabilities. Due to these tax and creditor protection benefits, many people might want to bequeath their individual retirement account assets and retirement plan assets to a testamentary trust. However, this might be difficult to do. Until recently, tax laws made it hard to bequeath IRA and retirement assets to a trust as a beneficiary. Although new regulations appear to be making the process easier to achieve, there are still a lot of unanswered questions.

At the Law Office of Barbara J. Dibble, we are happy to answer any questions you might have about testamentary trusts and what might be possible (or advisable) to achieve in your unique financial and familial situation. We can even evaluate your chances of being able to successfully transfer IRA assets into a testamentary trust at the moment of your death.


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