What to do about a Trust and a retirement account?

I am a single father and my estate (through my Will and Trust) is left to my son and daughter. I understand that retirement accounts are not part of the trust (unless the trust is listed as the beneficiary). I have someone outside of my family listed as the beneficiary. Will my children be notified that I have a retirement account? And if so, will the beneficiary be revealed to them?

Asked on January 9, 2013 under Estate Planning, California


Catherine Blackburn / Blackburn Law Firm

Answered 8 years ago | Contributor

I strongly recommend that you consult a life or estate planning lawyer about this.  It sounds like your assets my go to the wrong person.  If you want your retirement funds to go to your children, then do not name "someone outside the family" as the beneficiary unless you do so in a way that makes that person trustee of the funds for the benefit of your children.  If you just name the "outside person" as beneficiary, they will get all your money and your children will be entitled to nothing.

A lawyer can create what is known as a "conduit trust" for your retirement benefits (or can modify your existing trust to include a "conduit trust").  A conduit trust allows the Trustee to take over tax-deferred retirement funds for the benefit of someone (for example, a minor child) and continue to hold those funds tax-deferred until the beneficiary should or must take a distribution.  If you leave retirement funds outright to a trust or your estate, the account will be liquidated and income tax will be due all at once on the entire balance.

Everyone needs to understand that listing a beneficiary on anything (including a retirement account) means that beneficiary gets it.  Unless you are very careful to say "to the beneficiary as Trustee for the benefit of . . . ., my minor children according to the Uniform Gifts to Minors Act" or something similar (if your state recognizes that statute), the beneficiary gets the account for himself or herself and is not required to share it with anyone - no matter what your will or trust says.

Please be careful that your documents carry out your intentions.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.