Most people plan to leave a retirement account, such as an Individual Retirement Account (“IRA”), Roth IRA, 401 (k) Plan, 403 (b) plan, Employee Stock Ownership Plan (“ESOPs”), for their surviving spouse to live on when he or she passes away.

Surprisingly, this oft used planning device can be nullified—because it can be seized in a divorce, lawsuit, or bankruptcy. As such, your spouse can end up lacking the resources he or she planned on having as a source of retirement income.

3 Options Available To Surviving Spouses:

When your surviving spouse inherits your IRA, he or she generally has three options:

 1. Cash out the inherited IRA and pay the associated income tax. 

 WARNING: The cashed-out IRA will not have creditor protection and accelerates taxation.

 2. Maintain the IRA as an inherited IRA. 

  WARNING: The cashed-out IRA will not have creditor protection.

 3. Roll over the inherited IRA and treat it as his or her own.

  WARNING: The cashed-out IRA will not have creditor protection.

It is understandable why man become frustrated when realizing that a predator can swoop in and take their hard earned money; fortunately, there’s a solution and that solution is a retirement trust.

 Standalone Retirement Trusts Provide Protection:

A Standalone Retirement Trust (“SRT”) is a special type of trust designed to be the beneficiary of your retirement accounts after you die. It can protect your assets from creditors.  In fact, we can include trust provisions which specifically benefit your spouse in situations such as:

1.      Second marriages

2.      Divorce

3.      Lawsuits from car accidents, malpractice, or tenants

4.      Business failure

5.      Bankruptcy

6.      Medicaid qualification 

 Want To Know More? 

The bottom line is that a properly drafted SRT is often your best option for protecting your retirement assets (and providing the bonus of tax deferred growth). Want to know more?  Contact us today to schedule a conversation.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.