Living Trust as Beneficiary

[Monica Barnard]

Bob had a SOLOK, and died.  He was not married and had no children.  He had designated his Living Trust as his beneficiary.  It is my understanding that the benefit due to be paid into his Living Trust is not an eligible rollover distribution, and the executor of the trust can submit a W-4P to elect no FIT.  Then the benefit would be paid directly to the Living Trust, and from there, paid out according to the terms of that trust.  Is that correct?  

[My 2 cents]

19 minutes ago, Monica Barnard said:

Bob had a SOLOK, and died.  He was not married and had no children.  He had designated his Living Trust as his beneficiary.  It is my understanding that the benefit due to be paid into his Living Trust is not an eligible rollover distribution, and the executor of the trust can submit a W-4P to elect no FIT.  Then the benefit would be paid directly to the Living Trust, and from there, paid out according to the terms of that trust.  Is that correct?  

I am not a lawyer and not an expert on such things as living trusts, but don't they cease to exist immediately upon the individual's death? 

[Mike Preston]

Typically they morph from revocable to irrevocable on death.

[My 2 cents]

Just out of curiosity, when the participant dies and benefits are distributed to the beneficiary (whether a trust or not), would that not be considered an event taxable to the participant?

[david rigby]

Might not be exactly on point for you, but we have a couple of clients with DB plans, where the document specified a lump sum payment to the participant's estate (ie, in situation similar to the original post).  Our review determined that:

• estate was not eligible for rollover, therefore no 20% withholding, and
• LS distribution was subject to default (10%) withholding, but the estate could submit a W-4P to elect zero withholding, and
• estate must have its own TIN.

[XTitan]

2 hours ago, My 2 cents said:

I am not a lawyer and not an expert on such things as living trusts, but don't they cease to exist immediately upon the individual's death? 

Nope, living trusts do not cease to exist upon the death of the grantor.  The trustee (or successor trustee) continues to oversee the trust as directed by the trust document.  Wouldn't say it irrevocable, but if any of the terms of the trust need to be amended post-death of the grantor, you need beneficiary approval and also may need to go to court.   Not an attorney either, but acting a trustee post-death of the grantor right now.