IRAs, 401(K)s, 403(B)s and other
qualified plans are a wonderful way to plan and save for your retirement. These
plans can also become impressive legacies for your heirs and beneficiaries.
With the proper estate planning techniques implemented parents can ensure “stretch-out” of
the qualified asset as well as provide protection from divorcing spouses, protection
for minor or elderly beneficiaries, and protect the qualified asset from creditors
When assisting clients and their financial advisors on Retirement Asset Planning,
we go through the many details and issues that concern retirement assets and discuss
each client’s goals for their retirement and their beneficiaries.
Benefits of the IRA Inheritance Trust
- Ensure "Stretch-out"
With the tax law change in 2003, the IRS allows the required minimum distributions (RMDs) of inherited IRAs to be calculated using the beneficiaries’ life expectancy. What this means is smaller distributions and longer tax free compounding. Unfortunately, most inherited IRAs never get to enjoy this “stretch” because the IRA is “blown”. This “blow-out” happens either because the beneficiaries don't understand the rules or they just want to spend it. The IRA Inheritance Trust allows you to lock-up the IRA and ensure the stretch while still allowing the beneficiary access to those funds should they need them in an emergency.
- Divorce Protection
IRAs should not be included in a divorce decree. However, going through a divorce is a very stressful time and IRAs are frequently seen by divorce attorneys as a easily accessible pot of money to fund a marital dissolution agreement. The IRA Inheritance Trust will protect against a beneficiary losing the inherited IRA through a divorce.
- Protection for Minors
People are apprehensive about leaving money to minors because they do not know how that person will grow up and do not want fund self-destructive habits. With the IRA Inheritance Trust you can name a trustee that ensures that the assets are there for the minors’ benefit but will not be used exacerbate any character flaws.
- Lawsuit, Creditor and Bankruptcy Protection
Inherited IRAs should be protected from these types of claims but when the money is withdrawn from the IRA, as most beneficiaries do; those funds are subject to the claims of creditors and bankruptcy. With the IRA Inheritance Trust you can protect not only the corpus of the IRA but also the required minimum distributions.
- Protection from Losing Government Benefits
For those individuals who receive government benefits any asset left in an inheritance can be subject to the pay-back rules. With the IRA Inheritance Trust you can be certain that those monies will be used to give that beneficiary the “extras” in life and not be used to pay back Uncle Sam.
- Minimize Future Estate Taxes
If IRA assets are left to beneficiaries in their individual name they may be subject to estate taxes when they pass as the inherited IRA is includable in the beneficiaries’ estate. However, if the IRA is left in the IRA Inheritance Trust it will never be estate taxable again.
- Leave a Legacy in Your Name
Eventually we are all going to pass on to our greater glory. It is how we are remembered by those who loved us and knew us that keeps us alive forever. With the IRA Inheritance Trust a check will be coming to your beneficiaries with your name on it for their benefit every quarter. This will be part of your legacy.