IRA Inheritance Trust™ Lawyers Working to Protect Your Family in Cape Cod and the Surrounding Islands

For many families, qualified retirement accounts, like IRAs, 401(k)s, Roth IRA and 403(b)s, represent the largest asset they own and will leave as an inheritance. Yet, most people make the mistake of leaving their qualified accounts “to” their loved ones rather than “for” their loved ones. This common mistake means the retirement accounts are left unprotected. An IRA Inheritance Trust ™ is a special kind of revocable living trust you are able to set up. It is designed to become the beneficiary of your IRA, 401(k), 403(b) or other qualified retirement accounts after you die. It was approved by the IRS as a way of providing your beneficiaries with both protection from creditors and the ability to take advantage of RMDs (Required Minimum Distributions) over the longest time permitted under the law (up to ten years in most situations, with life expectancy available to some beneficiaries in limited circumstances). Most other trusts require that the IRA funds must be distributed by the end of fifth year following the death of the IRA owner.

With an IRA Inheritance Trust™ RMDs are allowed to be calculated based upon the life expectancy of the beneficiary. This means that the money inside a traditional IRA may compound, tax-deferred, for as long as possible. And if your have a Roth IRA, by naming an IRA Inheritance Trust™ as beneficiary, the money that remains in the inherited retirement account can grow tax free for the longest time possible AND be protected from claims against a beneficiary, like a divorce, bankruptcy, lawsuits or other claims.

What Are The Benefits of Setting Up an IRA Inheritance Trust™?

Protection and maximum income deferral are two key benefits that can now be obtained simultaneously by setting up an IRA Inheritance Trust™ as the beneficiary of your retirement account. In many cases, when a beneficiary inherits your IRA or other qualified retirement account directly, there may be many risks and disadvantages that come along with ownership.

First, money inherited from an IRA account is not protected from external threats such as creditors, lawsuits, divorces, and bankruptcy. While retirement accounts are shielded from such threats for the person who contributes to the retirement account, once the retirement account is inherited by a beneficiary, it is no longer protected. This can result in the loss of a great percentage, if not all, of the money you worked so hard to save and pass on to the next generation. By setting up an IRA Inheritance Trust™ , you can help your beneficiaries still be able to access the funds without the liabilities that may come along with being named as the beneficiary.

Second, there is the possibility of deferring withdrawals over the longest time allowed under the law (since the SECURE Act went into effect in 2020, the maximum is generally 10 years, but there are exceptions that allow for withdrawals over the lifetime of the beneficiary). This allows your IRA or other qualified retirement account to have even more time to accrue value and grow. If you’d like to learn more about the SECURE Act and how it impacts estate planning for retirement accounts, watch our webinar.

How Do I Know if an IRA Inheritance Trust™ is Right For Me?

Any individual or married couple who has retirement accounts, like IRAs, 401(k)s, Roth IRAs, or any other qualified retirement plans with a combined value of $150,000.00 or more should consider setting up an IRA Inheritance Trust™. By doing so, you will be able to have greater control over what happens with the money you hand down to your children and grandchildren. By using an IRA Inheritance Trust™, you can have peace of mind. You will know that the retirement funds that are inherited can stay with the person you leave them, and not be lost to a divorce, a bankruptcy or other problem the beneficiary may have after inheriting from you.

You worked hard to build your wealth and to ensure your children and grandchildren are cared for, but as you can see, there are some risks and external factors that may prevent your beneficiaries from preserving the money for themselves and for the generation after them. An IRA Inheritance Trust™ might be the right choice for you and your family if you are concerned about what can happen to your hard-earned money once it gets passed down.

How Can I Learn the Next Steps I Need To Take If I Want To Set Up an IRA Inheritance Trust™?

At the Law Offices of Boyd & Boyd, P.C., we have been studying the ins-and-outs of this type of trust and have worked with clients who ended up dealing with the headaches and expenses associated with a trust that did not work as originally planned. Our team of estate planning lawyers recommends every trust owner to consult an attorney every three years for updates to their trust, or even sooner depending on whether they have had a major life event that needs to be accounted for in their trust.

Likewise, the laws changed drastically in 2019 and it may affect the way your trust needs to be written. If you are considering updating your estate plan by adding an IRA Inheritance Trust™ and are unsure if this is the right choice for you, or would like to gain a deeper understanding and get all the relevant details explained to you by one of our attorneys, please contact The Law Offices of Boyd & Boyd at (508) 775-7800 and request a consultation. We are here to help you navigate through the most recent changes in law and work with you to help you make the best decision to protect your wealth and your family.