If you have a living trust, you may also have bank accounts or investment accounts titled in the name of your living trust. In that case, the financial account titled in the trust does not need a transfer-on-death (TOD) beneficiary designation and that account will always pass through your trust and be distributed to the beneficiaries under your trust.
However, if you have a bank account or investment account that is titled in just your name (or your name and your spouse’s name) and not titled in the name of a living trust, you may want to consider naming one or more persons as the TOD beneficiaries on that account.
We recommend if you have a living trust, to set up trust accounts for all bank accounts (checking, savings, money market, CDs) and non-retirement investment accounts. And if you open new bank accounts or non-retirement investment accounts after you create your trust, just title the new account in the name of the trust.
As for your IRA, 401(k), or other tax deferred retirement plan, these accounts do NOT get titled in the name of your living trust. They should remain in your name and, if you are married, you should designate your spouse as the primary TOD beneficiary of your tax deferred retirement plans. You can also name your children or other beneficiaries as contingent beneficiaries. Or if you have a living trust, you can make the trust the contingent beneficiary, and the advantage to making the trust the contingent beneficiary is that a trust never dies.
We recommend you title all non-retirement accounts in the name of your living trust for both distribution when you pass away and for incapacity planning. If you become incapacitated during your lifetime, your trust assets can be made available to your successor trustee for your long-term care when and if you become incapacitated. This can make it easier for your successor trustee to take care of you.
Life insurance policies and annuities should be set up for TOD beneficiary designation. You should not title the policy or annuity in the name of your living trust, but you can designate your trust as the beneficiary of any life insurance policy or annuity. Most people will name their spouse or adult children as the primary beneficiary of any life insurance policies or annuities, which is also fine.
If you plan to make your trust a primary or contingent beneficiary of your bank account, investment account or even your retirement account, it is important to update your TOD beneficiary designation forms with the financial institution. You will need to contact them and request they send you an updated beneficiary designation form and make sure you submit that form and that it is property processed with the financial institution.
Transfer of Death (TOD) Beneficiary Designation Services
If you have questions about creating a trust account or creating a TOD beneficiary designation, please contact Estate Planning Attorney, Eric A. Rudolph, at (760) 673-7600 or schedule an estate planning consultation.
