California: My cousin recently past, and had a revocable trust naming me as the trustee and beneficiary of the trust. He also named me the executor and the his contingent beneficiary in his will to all of his assets. He set this up in 2008 due to his failing health. He forgot to change the name of the beneficiary on his 401k plan that is included in the trust. It is in his mother's name. Now, I don't have any liquid asset to finish up his business because of this mistake. The trust even states I'm to get everything listed in the trust. I'm aware that the trust is irrevocable now. It doesn't make sense set this up and not change the designated beneficiary named on the 401k, which is now the estate due to tax issues, hence the reason why he set this up to protect his assets. Can someone help with this issue?
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Executor, successor trustee, and beneficiary.
- Thread starter tobein
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I can't provide an answer, but, if other responders have the knowledge, maybe you can clarify:
1) Is the designated beneficiary of the 401(k) the cousin's mother? Is there a contingent beneficiary?
2) The trust somehow indicates that cousin's intention was that the 401(k) proceeds should flow to the trust(?).
3) What tax issues are you referring to?
The trust cannot own the 401(k). The proceeds could have been directed to the trust through the beneficiary designation if the plan permitted that.
There is a procedure in California called a Heggstad petition that is used to direct assets that were not titled to a trust through mistake or oversight into the trust rather than into the probate estate. I don't know the particulars about using the petition and I am not certain that it would work to modify a beneficiary designation on a retirement account.
I would suggest consulting with an estate attorney familiar with Heggstad.
1) Is the designated beneficiary of the 401(k) the cousin's mother? Is there a contingent beneficiary?
2) The trust somehow indicates that cousin's intention was that the 401(k) proceeds should flow to the trust(?).
3) What tax issues are you referring to?
The trust cannot own the 401(k). The proceeds could have been directed to the trust through the beneficiary designation if the plan permitted that.
There is a procedure in California called a Heggstad petition that is used to direct assets that were not titled to a trust through mistake or oversight into the trust rather than into the probate estate. I don't know the particulars about using the petition and I am not certain that it would work to modify a beneficiary designation on a retirement account.
I would suggest consulting with an estate attorney familiar with Heggstad.
Just under 100k. It's $98,950.24 to be exact.
To anteater questions:
Mother is designated beneficiary of 401k. I'm his contingent beneficiary in his trust and will. The trust does indicate the 401k should flow through the trust, however he has a will naming me the executor and his contingent beneficiary. He set up the 401k to flow through the trust to me, and forgot to change his mother's name to mine on the 401k's. The 401k would have exempt me from taxes because it was named in the trust and I'm the successor trustee, however since he didn't change the name change to mine, she will be subject to taxes per lawyer.
He was disabled, and very ill his last year on this earth. This big issue here is the mother doesn't want to share this money at all even though she knows of his intentions. Instead she wants me to sell what I have received to take care of the his bills, which isn't very much (two cars, and a small piece of property). When we didn't know who was the designated beneficiary on the 401k, I told her if it was in my name, I would share it with her. However, that wasn't offered to me when the shoe was on the other foot.
The tragic part about this situation is the fact that I grew up with my cousin and his mother, my aunt in a family environment meaning we considered each other as brother and sister, and his mother was my mother. My real mother died when I was nine. My father's sister took me in as one of hers. My aunt is the only person I have left in our family besides my four children. When my cousin named me as beneficiary, executor, successor trustee in his will and trust, he named my children if I were to precede him, not his mother.
To anteater questions:
Mother is designated beneficiary of 401k. I'm his contingent beneficiary in his trust and will. The trust does indicate the 401k should flow through the trust, however he has a will naming me the executor and his contingent beneficiary. He set up the 401k to flow through the trust to me, and forgot to change his mother's name to mine on the 401k's. The 401k would have exempt me from taxes because it was named in the trust and I'm the successor trustee, however since he didn't change the name change to mine, she will be subject to taxes per lawyer.
He was disabled, and very ill his last year on this earth. This big issue here is the mother doesn't want to share this money at all even though she knows of his intentions. Instead she wants me to sell what I have received to take care of the his bills, which isn't very much (two cars, and a small piece of property). When we didn't know who was the designated beneficiary on the 401k, I told her if it was in my name, I would share it with her. However, that wasn't offered to me when the shoe was on the other foot.
The tragic part about this situation is the fact that I grew up with my cousin and his mother, my aunt in a family environment meaning we considered each other as brother and sister, and his mother was my mother. My real mother died when I was nine. My father's sister took me in as one of hers. My aunt is the only person I have left in our family besides my four children. When my cousin named me as beneficiary, executor, successor trustee in his will and trust, he named my children if I were to precede him, not his mother.
Whoa, I have to apologize, I assumed that the cousin's mother had predeceased him.
Unless someone else has some ideas, I don't think that there is anything else that you can do. There is a living beneficiary named on the 401(k) and I don't see where the plan has any choice but to honor that beneficiary designation.
I am not certain where the lawyer is coming from regarding taxes. When the funds are distributed from the 401(k), they are going to be subject to income tax unless a rollover is done to an IRA. Cousin's mother can do that easily. If the trust or the probate estate were the beneficiary, it is still possible, but it gets hairier and there is more chance to screw it up.
Unless someone else has some ideas, I don't think that there is anything else that you can do. There is a living beneficiary named on the 401(k) and I don't see where the plan has any choice but to honor that beneficiary designation.
I am not certain where the lawyer is coming from regarding taxes. When the funds are distributed from the 401(k), they are going to be subject to income tax unless a rollover is done to an IRA. Cousin's mother can do that easily. If the trust or the probate estate were the beneficiary, it is still possible, but it gets hairier and there is more chance to screw it up.
My word of advice for this situation. If one plans to make someone his/hers' beneficiary and take care of his/hers' business after death, then make certain your designated beneficiary on 401K and Life insurance policies are the same as your beneficiary in your will. Or make provisions, e.g. setting up an account for burial, executing the will, etc., so that person can take care of your business without having to sell your tangible assets that amount to almost nothing.
My hands are tied due to the lack of funds available to me to take care of my cousin's estate. I can't execute the will. I've lost the house due to arrears in mortgage payments and no funds to pay for arrears. I can't pay any of his last bills or income taxes. I am held responsible for all this since I'm the executor.
Also, if you do set up a beneficiary on your 401K or life insurance, make certain that person will share the funds. Just because I have my daughter as my designated beneficiary doesn't mean she gets to walk away with the whole thing. She knows she needs to split it up between her and her brothers. Also I know she wouldn't be able to sleep at night if she didn't split it. Wait, it must be the reason why my aunt doesn't sleep at night.
Left holding the ****ty end of the stick of a bad, final joke.
My hands are tied due to the lack of funds available to me to take care of my cousin's estate. I can't execute the will. I've lost the house due to arrears in mortgage payments and no funds to pay for arrears. I can't pay any of his last bills or income taxes. I am held responsible for all this since I'm the executor.
Also, if you do set up a beneficiary on your 401K or life insurance, make certain that person will share the funds. Just because I have my daughter as my designated beneficiary doesn't mean she gets to walk away with the whole thing. She knows she needs to split it up between her and her brothers. Also I know she wouldn't be able to sleep at night if she didn't split it. Wait, it must be the reason why my aunt doesn't sleep at night.
Left holding the ****ty end of the stick of a bad, final joke.
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