In my last blog, I discussed the beneficial use of an IRA Inheritance Trust to ensure your beneficiaries maximize the power of inherited retirement accounts through compounded tax-free growth and less income taxes being due each year distributions are taken by taking advantage of distribution “stretch-out” over their life expectancies. Today I will discuss the additional benefit of the IRA Inheritance Trust: Asset Protection!
Most people are familiar with the fact that retirement accounts are generally protected from creditors during their lifetimes. . . but the same does not hold true for inherited retirement accounts. Inherited retirement accounts are not creditor-protected when it comes to your beneficiaries. If one of your beneficiaries were to get into financial strife or be receiving financial-based government benefits, your beneficiary may lose the full value of their inherited retirement account value! An inherited retirement account does not provide any of the following:
1) Beneficiary deciding to cash out the account earlier than required and blowing income tax “stretch-out” (which was discussed in my prior blog);
2) Wrong people eventually inheriting your retirement account assets (e.g. a spouse’s own children from a prior marriage or a second spouse upon your in-law’s remarriage);
3) Poor spending habits of beneficiaries, their spouses and children;
4) Poor money management/investment skills of beneficiaries;
5) Your beneficiary’s spouse taking some of the retirement account in a divorce;
6) Young, elderly or disabled beneficiaries who are unable to properly manage their affairs;
7) A beneficiary losing financial needs-based government benefits; and
8) A beneficiary’s lawsuits, creditors and even bankruptcy grabbing your retirement account inheritance.
The solution to all of these potential devastating consequences of an outright inherited retirement account is the IRA Inheritance Trust! The IRA Inheritance Trust not only maximizes income tax deferral and wealth calculation, it also provides enhanced protection of any undistributed monies being held in the inherited retirement account, thereby ensuring:
1) Proper distribution to your intended beneficiaries;
2) Spendthrift protection;
3) Professional money management;
4) Divorce protection;
5) Minor and disability protection;
6) Government benefits protection;
7) Lawsuits and creditor protection;
8) Minimized income/estate taxation; and
9) A legacy in your name for your loved ones.
As discussed in my prior blog, incorporating an IRA Inheritance Trust into your estate plan is a difference that could mean MILLIONS!
If you’d like to learn more about the IRA Inheritance Trust and whether it is appropriate for your family’s needs, please contact our office and we’d be delighted to meet with you and discuss the opportunity!