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Are you accidentally screwed over your beneficiaries? You might say you want to leave them as much as possible, but when was the last time you reviewed your estate plan? Let’s talk about how a small mistake could cost your loved ones big. Hi, I’m Hunter Brockway, founder of Boca Retirement Strategies. I guide people to a successful, stress-free retirement, helping them spend more, save on taxes, and leave a meaningful legacy. It’s common to name your trust as your beneficiary. There’s nothing inherently bad about naming your trust. In many cases, it is recommended this way, but if your trust is not set up properly, the outcome could be far less favorable for your beneficiaries. The IRS has different rules for different types of beneficiaries. Let’s focus on a common scenario, leaving your retirement accounts to your children. Most individual beneficiaries fall under the 10-year rule, which means they have to withdraw all the money from your pre-taxed account within 10 years of inheriting it. Uncle Sam, of course, wants his share of those taxes deferred dollars.

But when a trust is named as the beneficiary, it gets more complicated. Trusts can fall into one of two categories. The 10-year rule, just like an individual, the trust must withdraw all of the funds within 10 years. The five-year rule, the trust must withdraw all of the funds within five years, essentially cutting the time in half and likely causing a much bigger tax hit. Here’s where it gets worse. Trusts are subject to higher tax rates than individuals. Unless the trust distributes all of the funds directly to the beneficiaries, the trust itself could face steep tax consequences. But distributing the funds directly may not align with the goals of your trust to begin with, like controlling when or how beneficiaries receive the money. If your trust is not set up according to the IRS guidelines for this specific inheritance situation, you’ve got problems. The bottom line is this. Your financial plan and estate plan need to work together. Think deeply about your goals, whether it’s minimizing taxes protecting your legacy or supporting your family and make sure every part of your plan reflects those priorities.

Make sure your trust is structured properly and your beneficiaries are listed properly. Estate planning isn’t just about what’s written in your trust, it’s about making sure your money goes where you want it to in the most efficient way possible. If you found this video helpful, subscribe to our YouTube channel for more tips on retirement taxes and legacy planning. I’m Hunter Brockway, founder of Boca Retirement Strategies. Let’s make sure your retirement and your legacy are as stress-free as possible. Before you go, if you’re looking for a free tax-smart retirement plan tailored to your unique specific situation, you can head over to our website at bocaretirement.com, enter your information in the pop-up, and we’ll build you a plan tailored to your unique specific situations at no cost or obligation. If for some reason that pop-up doesn’t show for you, if you click out of it, no worries, just send us an email at contact at bocaretirement.com.

Again, that’s no cost, no obligation, we’ll put together a simplified plan for you to help you take the next steps towards a successful, stress-free retirement with more money and fewer taxes. See you over there.