From our “Ask a Question” Mailbag: Sheltering IRAs

Most Recently Updated August 1, 2018.

“My only asset is a large individual retirement account (IRA). I am 79 years old and am worried that, in the next few years, I may have to move into assisted living or a nursing home. Can I move my IRA into an Irrevocable Trust to shelter it from creditors?”

Sheltering IRAs

Sheltering IRAs

You are really asking two different questions. The first is about sheltering your IRA from creditors. Your IRA is –by law — already sheltered from your creditors. Now that your are older than 70 and 1/2 years, you have to take a certain amount out each year, which your creditors could access, but the IRA itself is sheltered. So, in general terms, there is no need to change your IRA if your concerns are simply about future creditors.

Your second question seems to be: can you move your IRA so you can qualify for Medicaid to help pay for nursing home bills. The answer is yes, but you may not want to do this. To remove the IRA from your name, you will have to liquidate the IRA and pay all the income taxes due. (This might be a good idea, or it may not, there is no way to determine this from general information.) Tax calculations must be made comparing the income tax payable compared with the advantages of sheltering the after tax dollars.

How Can I Help?

I would need to know your own estate planning goals and your comfort level on giving up control over your assets. To be sheltered from your creditors’ claims, the Irrevocable Trust cannot name you as a beneficiary and you cannot have the ability to demand the return of the money. Further, there is a look-back period for transfers to an Irrevocable Trust which will disqualify you from receiving medicaid, so the gift must be made years before your application.

To be able to tell you which option best suits you, I will need to speak with you about your specific concerns, and your estate planning and asset protection goals. This would be a free consultation, so nothing is lost by just speaking with me!

More Planning Questions?

Sheltering IRAs and other assets is only a piece of the Estate Planning process. By all means, if you want to learn more, please read my more detailed article, Estate Planning Everything You Need to Know.

In Conclusion: Sheltering IRAs

I hope that this article was helpful in explaining how to protect assets. Further, I included links to even more detailed information on my website so you can learn more. Therefore, please contact me and let me know how I did. Certainly, your comments and questions are welcome!

Let our Estate Planning lawyers help walk you through what can be a confusing process. To begin with, call to speak to one of our experienced estate planning lawyers.  By all means, our lawyers are ready to answer your questions. In fact, feel free to contact our office for a free consultation. Ultimately our goal is to make the process as painless as possible!

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