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Question:

We set up an irrevocable trust last year with our daughter, age 50, as beneficiary and trustee. The asset was an apartment building in California which is 100% paid. We would like to put my husband’s (not retired) TIAA CREF funds into this established trust. Is this possible or what is your suggestion for these funds in order for us to avoid or have a lesser tax consequence?

Response:

TIAA CREF funds can be complicated by the company’s own rules, but for purposes of our discussion they would be treated like any other retirement account. Therefore, like IRAs or 401(k) plans, you cannot transfer them into trust without first liquidating them and paying any deferred taxes. So, it would be inadvisable to transfer them into the trust now.

Your husband can, however, have them payable to trust upon your his death, or upon your death if you were to survive him. As part of the SECURE Act, Congress shortened the time the person inheriting a retirement plan has to withdraw the funds and pay the deferred taxes from their lifetime to 10 years (with some exceptions, including when a surviving spouse is the beneficiary). However, unless the trust is written with specific provisions for retirement funds, the timeline for withdrawal of funds left to trust is even shorter — five years. For that reason, my guess is that the existing irrevocable trust would not be a good vehicle for holding the TIAA CREF funds, even after your husband has passed away, whether or not you survive them. It’s more likely that you would need to create a new trust for this purpose. I recommend that you consult with an attorney well-versed in these matters.

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