THE EVERETT ADVOCATE – FRIDAY, DECEMBER 3, 2021 Page 25 “YOUR FINANCIAL FOCUS” JOSEPH D. CATALDO MAKING YOUR ESTATE THE BENEFICIARY OF YOUR IRA provide for Massachusetts estate tax savings so that when you die, you will have taken advantage of your $1million Massachusetts estate tax exemption by making sure the remainder share in your testamentary trust is funded with enough of the IRA or 401(k) account monies to bring the total of all assets being distributed to your children to at least equal the $1million. If your spouse is aging and you are In most situations you would name your spouse as your primary beneficiary of your IRA or 401(k) account. If you were to die, your spouse would be able to establish his or her own spousal IRA account and would be able to defer withdrawals until age 72, at which time your spouse would then be required to take out required minimum distributions (RMD’s) over his or her life expectancy. One reason why you might wish to make your estate the primary beneficiary would be to actually protect the remaining IRA or 401(k) monies in the event your surviving spouse were to go into a nursing home. If the estate were to be named the beneficiary of your IRA or 401(k) account, you would include a testamentary trust provision in your Last Will and Testament which would take effect once your Will is allowed. The testamentary trust would provide for discretionary distributions of income and principal in order to benefit your surviving spouse. One of the downsides to this, of course, is the cost and time associated with the probate process. Another downside to this is the remaining monies in the IRA or 401(k) account would have to be distributed over a five-year period with the passage of the SECURE act. Income taxes will have to be paid each year which will have a negative impact on the ability of the account to grow over time. The upside of this strategy is that MassHealth does not treat testamentary trusts the same as irrevocable trusts and the transfer penalty provisions do not apply to these trusts as well. There is no five-year look back period to be concerned with. With irrevocable trusts, there can only be income distributed to the Settlor, not principal. With a testamentary trust, principal distributions are allowed to be distributed to the surviving spouse without any negative impact on MassHealth eligibility. If the testamentary trust is structured with a remainder share and a marital share, this strategy may also concerned about a future nursing home admission, and are also concerned about providing for all of your spouse’s health care needs, daily living expenses, housing needs, etc., then this is one strategy to at least consider. For Advertising with Results, call The Advocate Newspapers at 617-387-2200 or Info@advocatenews.net
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