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Do you have significant assets in retirement accounts, and beneficiaries you want to protect?  As more “baby boomers” are retiring and rolling over large 401(k) and other retirement plans to IRAs, proper tax and estate planning for IRAs have become increasingly important.

Usually estate planners advise against naming living trusts as beneficiaries of retirement assets due to the highest marginal income tax rate associated with payouts to a living trust when the trust is named as beneficiary.  However, a special type of revocable trust, the IRA Inheritance Trust®, approved by the IRS is the most advanced “next generation” trust that allows maximizing both the stretch-out of an inherited IRA and the protection benefits of a trust.


Many IRA owners and their professional advisors “assume” that the IRA beneficiaries will make the right “stretch-out” decisions, or at least seek the advisor’s help before they take withdrawals. Unfortunately, that is often not the case when the IRA owner dies.

The beneficiaries are not prohibited from withdrawing more than the RMDs and may instead decide to cash out the IRA earlier than required, blowing the stretch-out.  Even if beneficiaries do not cash out IRA’s and instead convert the assets into an Inherited IRA, those funds are not protected if the beneficiary later has to file for bankruptcy. Also, if beneficiaries comingle inherited assets and later divorce, the inheritance from you is then subject to loss in divorce proceedings.  

The solution to protecting significant IRA assets is to create an IRA Inheritance Trust.  This separate trust acts as a conduit to provide the minimum required distributions from your retirement assets to your beneficiaries (upon your death), for their lifetimes.  The IRA Trust protects the assets, allows them to continue to grow tax-free until withdrawal, is protected in bankruptcy, and is a great estate planning tool.  

Our experienced attorneys will be pleased to add this stand-alone trust to any Family TLC, Inc. estate plan, or work with your outside estate attorney to create an IRA Trust for your family for this special purpose only.  

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