Careful and meticulous estate planning with an IRA trust can forestall unwanted consequences and capitalize financially on its long term value
For many people, most of their wealth is contained in their IRA’s. An IRA represents a lifetime of savings, with the added benefit of income tax deferment. If you have an IRA, you should know that failure to name a beneficiary can have significant financial consequences for your estate following your death. The specifics are complicated and vary according to your particular circumstances, ranging from accelerated income taxation to equal distribution between your preferred beneficiaries and your heirs whom, in some cases, you may prefer to receive little or nothing from your estate.
Even when a beneficiary is named, statistically speaking, the designated beneficiary is likely to withdraw most IRA assets from inherited IRA’s within the first two years of the beneficiary receiving the inherited IRA. Creating an IRA trust can allow for a more steady, longer term distribution of the IRA assets to your chosen beneficiary, thereby allowing the IRA assets to accumulate over time tax-free and remain available for your designated beneficiary’s longer term needs.
Whether you choose to create an IRA trust or name individual beneficiaries, this is a vital component in your estate plan that must be carefully reviewed.
The Fort Lauderdale estate planning attorney at The Law Offices of Gregory W. Kabel, P.A. understands the importance of this vital estate planning tool. Our concentrated focus on estate planning allows us to offer the very specialized legal counsel you need to make an informed decision.
The complexities of an IRA trust
Unlike other trust arrangements, naming a trust as your IRA beneficiary is not the same as transferring other assets into a trust upon your death. This arrangement can lead to extremely costly tax consequences when not implemented correctly. You need the skills of our trust attorney, who has extensive experience drafting IRA trusts. Otherwise, you may bid any tax advantages and financial investment benefits good-bye. Some things to consider:
- Your IRA trust beneficiary must be an identifiable person, and not a charity.
- The trust may be structured to require specific regular distributions or to allow the trustee to disburse funds based on objective criteria. If done correctly, either approach will allow for a “stretch out” of the retirement account distributions for ten years following your death.
- Spousal rollover benefits shouldn’t be overlooked. When applied correctly, this can stretch the tax benefits of the IRA trust over your spouse’s lifetime.
- Consider separate trusts. If you have multiple beneficiaries, this can be an advantageous simplification method. Moreover, it may ultimately be more beneficial than naming multiple beneficiaries to the IRA itself.
Regardless of the choices you finally make, the counsel of an attorney with the requisite knowledge of IRA trusts and of the governing rules and regulations is essential.
Why Choose an IRA trust?
While it’s true that an IRA trust isn’t the right option for everyone, there are some specific situations where this type of trust may have some important benefits:
- Minor Children – Clearly, minor children are in no position to manage IRA assets. In this case a trust may be the best choice.
- Spendthrift – If you believe a loved one may be less than prudent with the proceeds, an IRA trust may be part of the solution.
It’s imperative that you discuss your unique circumstances with our skilled trust attorney to determine the best options for your situation.
Rely on a Fort Lauderdale IRA trust attorney who specializes in estate planning for guidance you can trust
Contact The Law Offices of Gregory W. Kabel, P.A. to learn more about IRA trusts. Whether you are still working or already retired, this type of trust arrangement may be a great option for your estate plan. Our attorney guides you through the set-up of the trust now, and arranges to have it rollover into the inherited IRA upon your death. Call 954-761-7770 to schedule a consultation, or contact us online. Our law firm services residents throughout Fort Lauderdale, Wilton Manors and all of Broward County.