Caution: Creditors Now Have Easy Access to Inherited IRAs

Do you have IRAs or other retirement accounts that you plan to leave to your loved ones?  If so, proceed with caution.  Most people don’t know the law has changed: inherited retirement accounts no longer have asset protection, meaning they can be seized by strangers.

How Can Inherited IRAs Be Protected?  Enter the Standalone Retirement Trust

Fortunately, retirement account protection still exists but only if you take action.  Many people like you are using Standalone Retirement Trusts (SRT) to protect retirement assets.  The SRT is a special type of revocable trust just for retirement accounts. 

A properly drafted SRT:

●       Protects the inherited retirement accounts from creditors as well as predators and lawsuits

●       Ensures that inherited retirement accounts remain in your bloodline and out of the hands of a daughter-in-law or son-in-law or former daughter-in-law or son-in-law

●       Allows for experienced investment management and oversight of the assets by a professional trustee

●       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 you to name minor beneficiaries such as grandchildren 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 of your family

 The Bottom Line on Protecting Inherited IRAs

Unfortunately, the Supreme Court decision has made outright beneficiary designations for IRAs and other retirement accounts risky business.  However, we are here to help you decide whether an SRT is a good fit for you and to answer your questions about protecting your retirement accounts.

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.

5 Reasons to Protect Your Retirement Accounts Now

During your lifetime, your retirement account has asset protection, but as soon as you pass that account to a loved one, that protection evaporates. This means one lawsuit and POOF! Your life long, hard earned savings could be gone.

Fortunately, there is an answer.  A special trust called a “Standalone Retirement Trust” (SRT) can protect inherited assets from your beneficiaries’ creditors.  We’ll show you what we mean.

When your spouse, child, or other loved one inherits your retirement account, their creditors have the power to seize it and take it as their own.

If you’re like most people, you’re thinking of protecting your retirement account?  Here are 5 reasons we think you’re right.

1. You have substantial combined retirement plans.  Spouses can use an SRT to shield one or the other from creditors. 

2. You believe your beneficiary may be “less than frugal” with the funds.  Anyone concerned about how their beneficiary will spend the inheritance should absolutely consider an SRT as you can provide oversight and instruction on how much they receive – and when. 

3. You are concerned about lawsuits, divorce, or other possible legal actions.  If your beneficiary is part of a lawsuit, is about to divorce, file for bankruptcy, or is involved in any type of legal action, an SRT can protect the assets they inherit from those creditors. 

4. You have beneficiaries who receive assistance.  If one of your beneficiaries receives, or may qualify for, a need-based governmental assistance program, it’s important to know that inheriting from an IRA may cause them to lose those benefits. An SRT can avoid disqualification. 

5. You are remarried with children from a previous marriage.  If you are remarried and have children from a previous marriage, your spouse could intentionally (or even unintentionally) disinherit your children.  You can avoid this by naming the spouse as a lifetime beneficiary of the trust and then having assets pass onto your children after his or her death.

 You’ve Worked Hard To Protect & Grow Your Wealth – Let’s Keep It That Way

You worked hard to save the money in those retirement accounts and your beneficiaries’ creditors shouldn’t be able take it from them. Let us show you how an SRT can help you protect your assets as well as provide tax deferred growth. NOW is the best time.

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.

How To Avoid Creditors Inheriting from You

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.