[WSBAPT] Trust Management and Trusts for Retirement Plans

[Thomas White]

Dear Hive Mind:

I am dealing with my first estate plan that has 403(b) plans involved and have some very basic questions. Two on the mechanics of trust shares, one on planning for retirement benefits when dealing with minor beneficiaries.


  1.  When the language of a trust document says a share is to be transferred and delivered per stirpes, does that mean that after the transfer the beneficiaries own part of an indivisible share that has multiple beneficiaries, or do they each own a smaller share that has only one beneficiary?



  1.  When a testamentary trust is divided into shares, is the share percentage allocable to each child readjusted as money is spent for the benefit of each child? For example, suppose you leave $750K in a trust with shares 66 2/3rds for A and 33 1/3rd for B. You distribute $50K for A's benefit. Is the trust still owned 66 2/3rds by A and 33 1/3rd by B with total trust corpus reduced and new income is still 2/3rds A's, or is it now 450/700th for A and 250/700th for B? If there is a recalculation of percentage ownership, is it immediate upon distribution, or is it done annually? (I know what makes sense mathematically, I just want to be sure I understand the mechanics in practice. If you have a recommended resource or complex trust records I could look at, that would be helpful.)



  1.  Despite significant research, I am still not entirely sure what the best course of approach is for retirement benefits for a married couple with minor children if they both die. Right now I am looking at two clients with 403(b)'s from UW and Roth IRA's. Retirement plans are small, currently around 20K in the Roth and 120K in the 403(b) for one spouse, while the other has the same arrangement with mirrored amounts.



Do you (a) set up a second testamentary trust in the will that is a see-through accumulation trust with one share for each child, and make this trust the contingent beneficiary of the retirement plans, and make the youngest contingent beneficiary of the primary testamentary trust the contingent beneficiary of the retirement plan testamentary trust to maximize stretch-out, or (b) something else? Does this vary based on the 403(b) plan being used? Will trustees handle accounts in trust this small, or are costs prohibitive?



The youngest outright contingent beneficiary is in his 40s, but it seems like a stretch-out requires an outright beneficiary so you could not stretch it for the zero-year-old son.
Thank you for any thoughts. I want to be sure I do the best thing for my clients and their kids.

Kind Regards,

Tom

--
Thomas H. White
(206) 552-8650
Attorney/Owner
King County Business Law
https://linkedin.com/in/LawGuy
Thomas.H.White at KingCountyBusinessLaw.com<mailto:Thomas.H.White at KingCountyBusinessLaw.com>

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