Should I Name Trustee As Beneficiary on CDs and Accounts Held in a Trust?

Full Question:

I bought a Mutual Will for Married Couple with Minor Children. In that Will there is no mention about Life Insurance , CD's or retirement funds. The Section E of the Will says ..'...I direct that my Trustee administer hereunder any funds coming into the hands of my Beneficiaries pursuant to any life insurance policy insuring my life' . ...My questions is:Is it better if I change that sentence to the following statement: ' I direct that my Trustee administer hereunder any funds coming into the hands of my Beneficiaries pursuant to any Life insurance policy insuring my life and any funds coming into the hands of my beneficiaries from any POD accounts, CD's and any retirement funds'. ...or if I name The Trust as beneficiary on Life insurance, CD's and retirement funds?Thank you!!
08/05/2010   |   Category: Wills and Estates   |   State: Massachusetts   |   #22831


Annuities, insurance, IRA’s, Keoghs, and other property naming a Revocable Trust as the beneficiary don’t have to be re-registered into your trust. You do not have to re-register title for the types of property where you name the trust itself as the beneficiary to receive specific property after you die. For example, if you want your trust to receive your life insurance policy, IRA, or Keogh plan, must designate the trust as the beneficiary. But you do not have to transfer the ownership of the policy, IRA, or Keogh accounts into your trust’s name. While you are the Grantor/Trustee of the Revocable Trust, the trust is not legal owner of these types of property – you remain the legal owner. The trust is simply whom you’ve named to receive any benefits payable upon your death – life insurance proceeds, or the balance in your IRA or Keogh accounts. (Since your trust never owns the insurance policy, IRA, or Keogh, these assets are not listed on a trust schedule.)

Your trust should be the beneficiary of all annuities and life insurance policies and the contingent beneficiary of these legal documents (such as an insurance policy or an IRA) will take precedence over any will or trust. If, for example, you have named your spouse as the beneficiary of your life insurance policy, and you and your spouse happen to be killed simultaneously, the insurance policy will pass to your spouse, but then must go through probate to pass on to your children.

Certain assets are not included as part of a person's estate and may pass outside of probate, such as trust assets and transfer on death accounts or property owned by joint tenants which passes under a right of survivorship when one tenant dies.

Many individuals keep a small checking account in their own name, or use an informal bank trust account, wherein you name your trust as the beneficiary on the account form, so that your trust will receive the funds in the account after you die. The account itself remains in your name. This is often desirable for your personal checking account used to pay normal bills, because most people don’t want to hold that account, and its checks, in the name of a Revocable Trust.

Assets held in trust, or in an account or policy with an insurer or financial institution with a named beneficiary, typically pass outside the probate process. Such assets go to the named beneficiary outside the probate process. If it is a survivorship account, or transfer on death account, it passes outside the probate process. Property held in trust is distributed according to the terms of the trust. A named beneficiary on a transfer on death account, such as life insurance, CD, etc. doesn’t need to be administered through a trust. Therefore, real estate held by spouses as joint tenants with right of survivorship passes automatically to the surviving tenant outside the probate process. That means it will not be included as part of the estate that either passes under a will or according to state intestacy laws (applicable when there is no will). If the account is held as tenants in common, it's possible that the deceased owner's share could pass to heirs.

Ask Legal Question

Your Privacy is 100% Confidential!