Revocable Living Trust Agreement for 401(k) account registration

[SRP]

I have a request to "re-register" the shares of a participant's account into accounts in the name of a self-settled (or grantor) trust.

My thoughts are this cannot be done but I want to be clear with the Participant as to why and what are the alternatives.

1 - The participant is not the owner of the shares held in his account because since the Qualified Plan assets are held in trust the Trustee of the Plan owns the shares and not the participant. The participant has no rights to re-register or re-title while held within the Plan trust.

2 - The participant can name the trust as the beneficiary for the account (so long as J&S rules either don't apply or are satisfied).

I am fairly certain regarding #1 - but I don't know enough regarding #2 to indicate what is the effective difference between having the shares held within the living trust (as requested) and having the trust simply be the beneficiary of the participant's account.

What would be the different treatment, if any, since it is a self-settled (grantor) trust whereby the settlor/grantor and trustee is one in the same and essentially has control of the assets until death anyway.

Thanks in advance.

[Bird]

I agree with your reasoning. The employee is the participant, and the trustee is the trustee, and holds title to the assets for the benefit of the participant. The participant can name his trust as beneficiary but has no rights to re-title the assets.

If he persists, ask him where you should send the bill for further research.

[Guest mjb]

The participant has adopted a revocable living trust in which all assets he owns are supposed to be held by the participant as the trustee of the living trust. This requires that the assets be retitled in the name of the participant as trustee of his revocable living trust which is not possible for assets held in a qualified plan. Transferring retirement plan assets to a living trust after the death of a participant is not a wise tax move because it can result in the loss of tax benefits such as spousal rollovers, etc.

I dont think counsel for the employee understands why retirement plan benefits should/can not be held in a living trust.