Estate Planning: IRAs in Living Trusts

IRAs and Living Trusts

Protection of your Individual Retirement Accounts takes more planning than the beneficiary form offered by your bank or brokerage firm.  

Are your IRA accounts included in your Living Trust?

  

Unfortunately most IRA account holders are unaware that their retirement accounts are not included within their Living Trust.  

By design, Living Trusts are established to distribute real estate property, brokerage accounts, bank accounts, and other personal property...

 and DO NOT address the significant portion of most individual's net worth...

... their retirement accounts such as 401(k), 403(b), 457, Traditional IRA, or Roth IRA accounts.

Estate planning that includes your retirement accounts is more important than ever in light of the June 12th, 2014 U.S. Supreme Court Ruling, in which the Justices decided unanimously (9 - 0) that....

 "Inherited IRAs are not retirement accounts" and do not retain the same protections afforded to the original IRA owner.

The high-court referenced three characteristics of Inherited IRAs that provide evidence that they are not "retirement funds" within the meaning of the law that protects "retirement funds."  --  §522(b)(3)(c)

1. The holder of an inherited IRA may never invest additional money in the account.

2. The holder of an inherited IRA is required to withdraw money from the account, no matter how far this individual may be from retirement.

3. The holder of an inherited IRA may withdraw the entire balance of the account at any time and use it for any purpose without penalty.  

(However, with an inherited traditional IRA, the entire withdrawal would likely be taxable as ordinary income and, depending on the individual's income level, may cause a bump up into a higher tax bracket for the tax year of the withdrawal).

Is this important to you?  

Ultimately, do you want the money that you saved during your working years to land up in your son-in-law's or daughter-in-law's account after a divorce or be awarded to one of your beneficiary's creditors during a bankruptcy?  

Is it important to you that your money provides a lasting legacy for your children and your grandchildren according to your wishes and not someone else's?  

If so, then estate planning for your retirement accounts is a MUST DO. 

Now is the time to plan ahead. 

Do the research on estate planning, and how to use an IRA Trust for your beneficiaries, making informed decisions that are right for you, your beneficiaries, and your peace of mind.

5 Benefits of an IRA Trust 

1.  Eliminate lump-sum distributions to beneficiaries with poor money management skills.

2. Protect IRA assets from your children's spouses in a divorce and/or creditors in a bankruptcy.

3. The ability to choose an administrative trustee to distribute your IRA assets for you.

4.  Distribute your IRA assets over a period of time vs. lump sum distributions to minimize government taxes

.

5. Permit a Non-Spouse Beneficiary, for example, a son, daughter, and/or a grandson or granddaughter, to "Stretch-Out" the Taxable RMD Distributions over their lifetime.  

Does this have applicability to your situation?

We suggest you contact your financial planner and attorney to determine is this estate planning tool is applicable to you.