Mark and Leslie have been married for 40 years. They each have retirement accounts they have contributed to faithfully throughout their adult lives. Mark and Leslie have three adult children, and Mark has a child from a previous marriage. Mark has recently passed. What will happen to his retirement account? How can Leslie ensure her and Mark’s hard-earned money has adequate protection from creditors?

Leslie was named as the primary beneficiary of Mark’s retirement account. All four of his children were named as contingent beneficiaries. Leslie has three options when inheriting Mark’s individual retirement account (IRA), she could:

• Cash out the IRA and pay the required income tax: When Leslie cashes out Mark’s IRA, she will have ready access to the funds and can use them as she sees fit. She can even choose who will inherit the funds when she dies. She may even decide to leave all the money to one child, just her children or none of them. The money is not protected from creditors, and Leslie can expect a large tax bill. The funds can be seized in a divorce, a lawsuit, or a bankruptcy proceeding. Leslie is too financially savvy to consider this a good option.
• Maintain the IRA as an inherited IRA: Since the enactment of the Setting Every Community Up for Retirement Enhancement (SECURE) Act, Leslie can take the required distributions from Mark’s IRA over her lifetime and not be held to the ten-year rule. Leslie considers this option, but she does not need the money, and this option does not provide protection from creditors. Leslie would prefer an option that provides creditor protection and allows her to invest the money for her children instead of spending it now.
• Roll over the IRA into her IRA: Leslie can roll Mark’s IRA into her own, which will provide some creditor protection, but not in all cases. Leslie sees this option as deferring decision-making for distributing the funds to the children and adding to the additional income taxes for the next beneficiary. It also blurs the lines between what her and Mark’s children inherit and Mark’s child from a previous marriage’s inheritance.

Leslie needs a better option, one which will provide her creditor protection, allow her to make investment decisions for the money, and ensure that the funds are distributed to the children in the way she and Mark agreed. A properly drafted Standalone Retirement Trust can meet all of Leslie’s requirements.

The Benefits of a Standalone Retirement Trust

A Standalone Retirement Trust (SRT) is designed to be the beneficiary of your retirement accounts after your death. A Standalone Retirement Trust can protect your spouse, children, and other beneficiaries in the following situations:

• From creditors
• Second marriages or divorce
• From lawsuit claims
• Business failure
• Bankruptcy

A properly drafted SRT is one of the best options for protecting your retirement accounts after your death.  Learn more about SRTs and how they can ensure your retirement money benefits your loved ones, not their creditors.

You are welcome to schedule a call with us or reach us directly at 855.434.2062 to learn more about how best to plan today to protect those most important to you.