I am in the process of working with my Attorney to create a Revokable
Trust (among other things). I've been told by not terribly reliable
sources that I absolutely, positively must NOT add my IRA and 401K
accounts to this Trust. How come not (I ask innocently)? Any ideas? I
will add my house and my other investment accounts. How about my
$100,000 piano? How about Beauregard (the cat. Just kidding)?

Hello.

First of all, I should note that Google Answers provides general
information and is not a substitute for professsional legal, tax or
investment advice.  If you need professional advice, you should
contact a qualified attorney or financial advistor in your area.

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The bottom line is that, by law, most retirement accounts must be held
in the name of an individual person rather than a trust.  If you wish,
you can name your revocable trust as a BENEFICIARY of your retirement
account.

See:

From "Make Your Own Living Trust" by Denis Clifford (Nolo Press):

"Retirement accounts, such as IRAs, 401(k)s and profit-sharing plans,
should not be put in your trust. Indeed, for most individual
retirement accounts, it's not legal to do so. You name a beneficiary
or beneficiaries in these accounts to  receive any money left in them
at your death. While you could name your trust as beneficiary of these
accounts, there's generally no reason to do so, unless you'll use an
AB trust. If you are preparing an AB trust, consider whether you want
to name that trust to receive funds left in the accounts when you
die."
source: Amazon.com - Search Inside
http://www.amazon.com/exec/obidos/tg/detail/-/0873379853/


"7.3 Can my living trust hold title to my IRA?
No, an IRA must be put in an individual's name. However, you can name
your trust as a beneficiary."
source: Union Bank
http://www.uboc.com/personal/main/0,,2485_3267,00.html#7.%20FAQ%20Topic


"Assets with Named Beneficiaries:
Assets with named beneficiaries include: annuities, disability
insurance, life insurance, IRA's Keogh plans, 401K plans, pension and
profit sharing; and employee benefits. Assets with named beneficiaries
are not subject to probate and therefore, do not need to be owned by
your Revocable Living Trust. Rather, you should name your Trust as the
contingent beneficiary of these assets. In the event, the
individual(s) named as the primary beneficiary predeceases you, naming
your Trust as contingent beneficiary will ensure that these assets
will be distributed as outlined by the terms of your trust."
source: estateplancenter.com
http://www.estateplancenter.com/trust/trust.html

"3. How Are Life Insurance And Retirement Benefits Handled With A
Revocable Living Trust?
...
Retirement benefits (including IRA's) are subject to special income
tax rules. The surviving spouse can sometimes roll the benefits to an
IRA and continue the income tax deferral.  For this reason, the spouse
is often left as the primary beneficiary on retirement benefits, with
either adult children, or a trust for minor children named as the
alternate beneficiary if the spouse is deceased."
source: sglaw.com
http://www.sglaw.com/Article_EP_05.html

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search strategy:
"living trust" ira "named beneficiaries"
nolo, living trust

I hope this helps.

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Clarification of Answer by juggler-ga on 08 Aug 2004 16:05 PDT

Sorry for that typo in the second sentence:

"...financial ADVISOR..."

Absolutely perfect answer. I now understand and am very glad I asked
you before I did something that might have turned out to be illegal.
Thank you very much.

Hi, Andy!

Your question about trusts is out of my league, but regarding
Beauregard the cat, do keep in mind that cats should never be trusted.

~Pink

Pink: How great to hear from you. Out of your league, huh? Like in
"Seven League Boots"? Like in Puss-n-Boots? Out of your league,
indeed!

Did you hear about that new public statue called 'Never Trust Anyone'?

It was a spoof on the Justice theme, a stereotype figure holding the
Scales of Justice, etc.

Anyhow someone nicked the Scales within a matter of hours.

Serves them right for not properly attaching the scales to the statue.
And if they had left the blindfold off of Justice, she could have seen
who stole her scales and could have notified the authorities.

All right everybody. This is fun but I asked a serious question. Isn't
there a Google Answerer who knows about Revokable Trusts and IRA's? I
mean, like dudes, every self-respecting Answer Organization has one or
two or even three people able to field questions such as mine in a
thrice. Without breathing hard even. Oh, Answer Community: You've been
so faithful in the past (with one or two exceptions but these were
really, really hard questions), don't let me down now in my hour of
need. My Attorney is breathing down my back and it tickles. Make him
stop by answering my oh-so-simple question.