So much of our lives are spent planning for retirement. We build up wealth and assets in order to live a comfortable life in retirement. IRAs are popular retirement planning accounts that we advocate for and that many Americans use to build up enough to retire.
Ideally, when you plan for retirement you plan to have excess – and that excess will need to be passed on to someone of your choosing. Most people opt to designate one individual to receive excess funds from their IRA, but we believe placing your IRA in a trust is a better alternative.
Avoid Triggering Taxes for Beneficiaries
When you leave an IRA in a beneficiary’s name, they often take money out without realizing (or without caring for) the tax implications of such a withdrawal. If you place the IRA in a trust, however, it prevents unnecessary and early withdrawal.
You are able to designate how and when money can be taken out of these nest eggs that could set your children up for long-term financial success and early retirement. Establishing a trust and naming it as the beneficiary of your retirement account allows the money to continue to grow while your child focuses on finding their own success.
Creating Generational Wealth
By the time your children are ready to retire, you may have already set them up with enough money to do so through your own IRA that has been compounding over time inside of the trust. Successful retirement accounts provide an opportunity to create generational wealth in your family.
The assets you leave behind for your children outside of your retirement account should give them the head start they need to find success on their own. An IRA trust can allow them to retire comfortably while leaving their own retirement accounts in the hands of your grandchildren.
Protection from Creditors
If an IRA is transferred to an individual, the contents of it can often be targeted by creditors looking to claim unpaid debts. This means you risk giving your life’s work to a creditor instead of taking care of your loved ones.
If the IRA remains in a trust then the funds will generally be immune to the claims of creditors. This prevents your beneficiary from being left with nothing should litigation arise.
At Hedtke Law Group, we work with our clients to ensure optimal estate planning is in place. If you plan to have excess funds from an IRA that you will be passing on, contact our team so we can make sure your IRA trust is properly set up and managed.