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Inherited IRA Have No Asset Protection

Taxing iraThe United States Supreme Court has determined that inherited IRAs are not protected from bankruptcy creditors. This development presents a serious risk for clients but there are solutions we are prepared to talk to you about.

THE PROBLEM:  If a retirement account is seized in a lawsuit, spent down on frivolities, or wrangled from a beneficiary by a predator, those assets are lost forever. If a trust for the benefit of your loved one is named the beneficiary at your death, the trust itself provides the asset protection needed.

THE SOLUTION: The Standalone Retirement Trust is the solution because in the absence of any creditor problems now or in the future for the owner, it can assure, not only asset protection of the IRA but continuation of the ‘stretch’ allowing it to grow.

By far the best option for protecting retirement accounts is to create a Standalone Retirement Trust (SRT) for the benefit of all of the intended beneficiaries. If properly drafted, this type of trust offers the following advantages:

  • Protects the inherited retirement account from beneficiaries’ creditors as well as predators and lawsuits
  • Ensures that the inherited retirement account remains in the family bloodline and out of the hands of a beneficiary’s spouse, or soon-to-be ex-spouse
  • Allows for experienced investment management and oversight of the retirement account assets by a professional trustee (continuing what you began)
  • Prevents the beneficiary from gambling away the inherited retirement account or blowing it all on exotic vacations, expensive jewelry, designer shoes, and fast cars
  • Enables proper planning for a special needs beneficiary
  • Permits minor beneficiaries such as grandchildren to be immediate beneficiaries of the inherited IRA without the need for a court-supervised guardianship
  • Facilitates generation-skipping transfer tax planning to ensure that estate taxes are minimized or even eliminated at each generation 

There is one more beneficiary you may not have considered; your spouse. There may be reasons that you want to establish a SRT with your spouse as its first beneficiary:

  • Creditor protection, including a second marriage with a blended family
  • Spend-down protection from a long term care need

SRTs are certainly not one-size-fits-all planning and can only be done on an individual, case-by-case basis. We are here to answer your questions about protecting beneficiaries of retirement accounts through Standalone Retirement Trusts including layered beneficiary designations. Call us today to schedule your complimentary consultation.

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We've been putting together as many resources as possible so that we can continue to help:

  • If you’re a current client with a signing appointment or a prospective client with a consultation and would prefer that meeting take place in your own home, we can accomplish that with a little bit of pre-planning on our part and with the addition of a laptop, smartphone, tablet or other computer in your home to facilitate this virtual meeting. For those of you that need to sign legal documents, that too can be accomplished with the use of a webcam (FaceTime etc.), so that we can witness and electronically notarize all of your important legal documents.
  • We launched the rollout of our on-demand webinar early so that new clients and our allied professionals can view the important component parts of ‘an estate plan that works’ at their convenience.  That is available on our website.
  • Live video workshops will be produced as quickly as possible and certainly ahead of our previous schedule; we will keep you posted as these events become available. Given the ‘boutique’ nature of the firm, we rarely have more than ten people in our office including team members at any one time. During this period of ‘social distancing,’ we promise to have no more than 8 people at any time.   This allows us to comply with the Governor’s directive to limit in-person gatherings.
  • The best way to communicate with us is still by phone during regular office hours of 8:30 to 5:00, Monday through Friday, or, you can email any of our team members (that is, their first name followed by @zarembalaw.com).  We will respond to these emails as quickly as possible.
  • Please continue to follow the directives of our local, state, and federal agencies. For your health and in consideration of our team who is assisting you, if you’ve scheduled an office appointment or planned to drop off paperwork and are experiencing a fever, dry cough, or shortness of breath, please contact your primary care doctor for guidance and then our office to reschedule.

Thank you, Walt and the Zaremba Team

Coronavirus/Covid-19
Update to our Process

The unprecedented coronavirus pandemic has taken our entire country by surprise. We understand how difficult this time is for America’s businesses and families.  However, we believe it is vitally important that we make every effort possible to continue to offer solutions that avoid disrupting our important partnership with you, your family and friends.  As you know, estate planning is not something that should wait for a more convenient time, therefore the opportunity to address your important goals both during and after this crisis should not wait.  To that end, we have added the option of a ‘virtual consultation’ to our office process.  You will now have a choice of either meeting with us in our office or in the comfort of your own home.