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Participant dies at age 81.  Was not Key or HCE.  Spouse had already died.  3 Adult Children, who are named as Contingent Beneficiaries.  Primary Beneficiary is named as Living Trust establish with the Participant's name.  Since Living Trusts are something I have zero experience with any suggestions, comments or advice on how to process this death benefit will be greatly appreciated.  Thanks!

Having braved the blizzard, I take a moment to contemplate the meaning of life. Should I really be riding in such cold? Why are my goggles covered with a thin layer of ice? Will this effect coverage testing?

QPA, QKA

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Interesting; I can't say I'm an expert but will offer some thoughts.

I think a living trust is generally set up to hold one's assets during their lifetime, and distribute them according to the trust at death, which sort of replaces a will.  The "big deal" is that this avoids probate; personally I think that is overhyped but I guess it depends upon the estate.

I'm not so sure a living trust is meant to accept assets after death, in which case the primary bene des would never ever be effective; that would be a curious result and probably depends on the terms of the trust.  I think you have to talk to the trustee(s) and or their attorney and ultimately have them fill out option election forms or otherwise determine if the primary is valid or not; probably get a copy of the trust even though you don't want to be interpreting it.

Ed Snyder

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If the trust meets the requirements of Treas. reg. 1.401(a)(9)-4, Q&A-5, and it may, you may be able to look through to the trust's individual beneficiaries, either shortest life or, if the plan permits division of the account into separate shares, all of them. Unless you're unlucky, the beneficiaries will all be individual human beings and have unrestricted interests, otherwise your analysis is only beginning.

If you can't look through to the trust's beneficiaries under the reg cited in preceding paragraph, you have no designated beneficiary and must proceed accordingly.

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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Luke Bailey:  While the RMD wrinkles are noteworthy, I think the OP's immediate concern has nothing to do with RMD issues.  It seems to me that the Plan has no choice but to recognize the trust as the beneficiary.  (That there may be no "designated beneficiary" for RMD purposes is irrelevant to identifying the proper beneficiary.)  Perhaps terrible tax/estate planning on the part of the decedent, but that's not a concern of the Plan. 

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Agree, jpod, but the RMD wrinkles will affect how much must be distributed, i.e. whether use participant's remaining life or beneficiary's (ies'). But yes, the trust document will initially determine who the underlying recipient(s) will be. E.g., the trust beneficiaries are probably the children, but it they are not, they would be cut out. If much money, they would like contest. Of course, this assumes a valid trust, executed, etc.

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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At the moment of death the Revocable Living Trust became irrevocable ("Dead" Trust?) and became a new separate legal entity from the decedent/grantor of the Living Trust.

You will follow the instructions of the successor Trustee as to how and when to make post-death distributions to the Trust (it now has a separate tax identification number) subject to the RMD requirements/issues discussed earlier in this thread.

 

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Agree with Flyboyjohn. What may happen is attorney for the trust may ask you to treat the trust beneficiaries as the beneficiaries of the plan. Generally this has only been allowed through PLR, and only a handful of those, and those only dealing with IRAs.

If trust is a qualified trust under the above cited reg, they could elect a direct rollover to an inherited IRA for the trust. Then it is the IRA custodian's problem.:)

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The "executor", who happens to be the oldest son and is a trust beneficiary, refuses to provide a copy of the trust document.  Asking him to have lawyer provide written statement of who should be paid the benefit, and yes there is an RMD.

Having braved the blizzard, I take a moment to contemplate the meaning of life. Should I really be riding in such cold? Why are my goggles covered with a thin layer of ice? Will this effect coverage testing?

QPA, QKA

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