Houston Estate Planning and Elder Law Attorney Blog
One big advantage of the trusteed IRAs: IRA owners can prevent their beneficiaries from spending down the accounts right away.
An IRA is a very powerful tool, if you use it right. Your IRA can essentially serve estate planning purposes beyond simple retirement funding in the form of a “trusteed IRA.”
A good place to start your education is a recent MarketWatch article titled “Trusteed IRAs Can Help Heirs Manage Inheritance.”
Basically, IRAs are fairly tidy little retirement accounts because they can be passed on to your heirs, thereby passing on some potentially nice tax advantages and a growing account outside the probate process. When inherited, IRAs still have to comply with a host of tax rules, and an heir can either take a lump sum upfront or figure out their own Required Minimum Distribution (RMD) pattern.
On the other hand, a trusteed IRA has that “trustee” – the same role that drives the engine of a full trust agreement – to watch over matters and guide the IRA from retirement account to a guided wealth transfer tool.
The trusteed IRA is an interesting option for a healthy middle slice of Americans planning their estates. Case in point, U.S. Bank describes the tool as best suited for accounts worth at least $2 million.
Whether or not it is right for you is another question. What is it you have to leave in terms of IRAs? Have you considered how and why you want to leave it to loved ones, even those who may not be as financially mature as you would like? How will you protect heirs from their own bad choices?
Fortunately, there are many ways to accomplish your goals. If a trusteed IRA is not the ticket for you, then there are other alternatives to evaluate, like the stand-alone IRA trust.
For additional information on tusteed IRAs, please visit my Houston website.
Reference: The Wall Street Journal (December 15, 2013) “Trusteed IRAs Can Help Heirs Manage Inheritance”