Wow! The response to our introduction of the IRA Protection Trust last month has been tremendous. It’s easy to understand why. The IRA Protection Trust is valuable insurance against the uncertainties of the future. By naming your IRA Protection Trust the beneficiary of your retirement account (IRA, SEP, SIMPLE and 401(k), 403(a), 403(b), 457, pension or profit-sharing plans) the “stretch out” required minimum distributions will pour into the Trust and the terms of the Trust will determine how and when the monies will be paid out to your beneficiaries. It will make sure that your beneficiaries do not “blow” your retirement.
While you may understand the wisdom in “stretching out” your retirement account, your spouse, children or grandchildren may not appreciate the benefits of a “stretch out”. All too often, we hear stories about what we term a “blow out” of an inherited retirement account where the heirs didn’t take advantage of the stretch out allowed by the IRS. Without the restrictions that you can specify in your IRA Protection Trust, your heirs could withdraw and spend your entire retirement account or your life savings, and may end up needlessly paying a nursing home.
All of the problems that can occur with your retirement account after your death can be avoided by naming an IRA Protection Trust as the beneficiary instead of a person. This will give you the maximum possible control over your tax-deferred money after you die. This is because the distributions from your retirement account will be paid according to your written instructions dictating who will receive this money, keeping your retirement money safe from irresponsible spending and creditors.
An IRA Protection Trust can:
1. Help “stretch out” the required minimum distributions from your retirement account. By taking advantage of this income tax deferral, you are enhancing future wealth accumulation for your beneficiaries.
2. Protect against the spendthrift and poor money management skills of beneficiaries, their spouses and children.
3. Allow for better protection of your retirement funds against your beneficiaries’ creditors, nursing homes and lawsuits.
4. Provide a legacy for your grandchildren and great-grandchildren so that many years after you’re gone, they are still receiving a gift from you year after year.
An IRA Protection Trust can be changed during your lifetime. This allows you to fine tune how and to whom you leave your retirement account as circumstances change. Upon your death, the Trust becomes irrevocable and cannot be terminated or changed.
Ted Vicknair is an attorney and CPA located at the Estate Planning Law Center, Alexandria, Louisiana. He has a Master of Laws (LL.M.) in Taxation and is certified as an Estate Planning and Administration Specialist and Tax Law Specialist by the Louisiana Board of Legal Specialization. To learn what kind of planning will support your family’s needs, contact Ted with the Estate Planning Law Center at (318) 445-4516 to schedule a free no obligation consultation.