VanNess & VanNess, P.A.

Protection offered by IRA trusts

Florida residents who are creating an estate plan may want to consider an IRA trust for their retirement account. These types of trust have become more popular since 2014 when the Supreme Court ruled that inherited IRAs were not protected from creditors. However, there may other reasons to use an IRA trust as well. It can also prevent beneficiaries from irresponsibly spending money that they come into suddenly. Although rules differ for workplace retirement plans, an IRA trust can also be the beneficiary on those plans. Beneficiary designations on retirement accounts should be current since these override other instructions.

With a conduit trust, the distributions go from the IRA into the trust and then to the beneficiary. With an accumulation trust, the distributions go from the IRA into the trust, but they are held there instead of being distributed to the beneficiary. This might be the option chosen by someone who is concerned about a beneficiary spending money irresponsibly.

Creating and administering a trust can be costly, so a person might want to weigh those costs in deciding whether or not to use an IRA trust. Another consideration is the worth of the retirement account. If it is more than $500,000, a trust may be important as a form of asset protection.

There are a number of other aspects of estate planning that people might want to discuss with their attorney. A person might want to put other assets into a trust as well for similar protection purposes. Trusts may also be set up to reduce taxes, to support a charity, to preserve wealth for later generations or to help a loved on with special needs. Another advantage of a trust is that it can allow beneficiaries to access assets more quickly since there is no probate process.

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