Blog & Resources

The IRA Trust, An Underutilized Estate Planning Tool.

To ensure that your money passes on only to your direct descendants, consider forming an IRA Trust.

All qualified plans (IRA, Roths, 401ks, SEPs, TIAA-CREF, etc.) allow you to name a beneficiary to receive the plan at your death. But, if this person is your child, they will have the chance to defer income tax recognition by converting the plan into an “Inherited IRA”. BUT, with an “Inherited IRA” your child, not you, has the ability to name a beneficiary. And it is likely this beneficiary will be your daughter-in-law or son-in-law rather than your grandchildren.

If you have named your children as beneficiaries of your individual retirement account (IRA), you have likely made a mistake that exposes the IRA to your children’s spouses, to their creditors and to easily avoidable future inheritance and estate taxes. Forming and naming an IRA Trust for your child as the beneficiary easily corrects this mistake.

Congress requires that all qualified retirement plans—including IRAs, SEP-IRAs, 401(k) plans, and 403(b) plans—must allow an IRA Trust to be named as a beneficiary. By doing so, Congress allows you to form an IRA Trust for your child that allows the Inherited plan to remain tax-deferred.