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leaving a 403b account as part of an estate


Guest ckrich
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Guest ckrich

I'd appreciate any information or thoughts anyone might have on the following issue.

I have a 403b account that I need to consider as I prepare my will and do some estate planning. My picture has been that a 403b account could be left to an individual or to a trust. Each approach had benefits and weaknesses. Leaving the account to an individual allowed the funds to be withdrawn over the life expectancy of the recipient, allowing for long protection from taxes; however, a young recipient might make poor withdrawal and investment decisions. Leaving the account to a trust could protect against poor decision making; however, the funds would have to be completely withdrawn within roughly 5 years after my death.

I've recently read that a trust mechanism is now available for Roth IRAs that gets around this problem. Specifically, I understand that Roth IRAs can now be left to a trust, but that the money only has to be withdrawn at a rate based on the life expectancy of the eldest beneficiary of the trust. This mechanism seems to have all the benefits I'd be interested in.

My question: does such a trust mechanism also exist for 403b accounts? If so, I'd appreciate learning about any books/magazine articles/webpages that contain relevant information.

Thank you much for taking your time to read about my question. I appreciate it very much.

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I am assuming that the payments have not commenced under the annuity contract. You need to retain a competent tax advisor/estate planner or attorney to discuss your options. A 403(B) plan is a tax deferred retirement plan. Transferring the funds to a trust will result in the taxation of the entire distribution. You could elect to have the distributions from the IRA paid directly to a trust as they are paid out but payments would cease at your death unless you elect a reduced payment over two lives. Why not roll over the 403(B) annuity to an IRA and then elect to have the payments from the IRA after your death paid to the trust under the minimum distribution rules and the trustee will then determine whether payments should be made to the beneficaries of the trust. One Question - Who will be the trustee of the trust? If you hire a bank the trustee fees will be pretty hefty. U could find an individual to act as trustee but they will be entitled to trustees fee under state law unless it is waived.

mjb

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