IRA Inheritance Trust™ Lawyers Working to Protect Your Family in Cape Cod and the Surrounding Islands
An IRA Inheritance Trust ™ is a special kind of revocable living trust you are able to set up and it is designed to become the beneficiary of your IRA after you die. It has recently been approved by the IRS as a way of providing your beneficiaries with both protection from creditors and the ability to take advantage of the possibility of “stretching out” RMDs (Required Minimum Distributions) over the beneficiary’s lifetime instead of being limited to 10 years.
In addition, taxable RMDs are now allowed to be stretched out based on the longer life expectancy of the beneficiary rather than on the life expectancy of the original IRA owner (usually the parent). This means that the money inside an IRA may now compound for much longer, and it is tax-deferred.
What Are The Benefits of Setting Up an IRA Inheritance Trust™ ?
Protection and maximum stretched-out time periods are two key benefits that can now be obtained simultaneously by setting up an IRA Inheritance Trust™ as the recipient of your IRA money. In many cases, when a beneficiary inherits your IRA 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, once the money gets passed down to 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 it.
Second, there is the possibility of maximizing the RMDs and “stretching them out” over your beneficiary’s lifetime. This allows your IRA account to have even more time to accrue value and grow. You can also add rules and stipulations to the trust to prevent your beneficiary from simply cashing out the entire account and spending it recklessly and paying 100% of taxable income on the withdrawal year. There are other minor but important details you can address, such as special provisions for special needs beneficiaries to keep them from losing governmental assistance, and unique situations involving either minor or differently-abled beneficiaries or even financially irresponsible beneficiaries. You can determine when and how the money from your IRA account will be distributed to maximize both protection and stretch-out benefits.
How Do I Know if an IRA Inheritance Trust™ is Right For Me?
Anyone who has retirement accounts, IRAs, a 401(k) or any other retirement plants (including those owned by a spouse) totalling $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 the next generation, including who receives it, how much they are allowed to withdraw at one time and under what circumstances.
You worked hard to build your wealth and to ensure your children and grandchildren are cared for, but as one 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, 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 have changed drastically in 2019 and it may affect the way your trust needs to be written. If you are considering updating your trust 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.
