If you have named your children as beneficiaries of your qualified plans (IRA, ROTH, 401k, TIAA-CREF, etc.), you have likely made a mistake. An outright beneficiary designation needlessly exposes the IRA to your children’s spouses, to their creditors and future inheritance and estate taxes. Since 2006 Congress has provided the tools necessary to protect your children.
In 2006 Congress required that all qualified retirement plans—including IRAs, SEP-IRAs, 401(k) plans, and 403(b) plans—must allow naming an IRA Trust 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.
Because your child does not own the Inherited IRA, the trust provides shelter from your child’s creditors as well and divorce complications. Further, the IRA Trust excludes the IRA from your child’s estate for death tax purposes. As a bonus, you may dictate that any amount remaining at your child’s death passes to your grandchildren, thereby avoiding your daughter-in-law or son-in-law.
The IRA Trust provides tremendous benefits for your kids with little ongoing costs if the child serves as the trustee.
In short, IRA Trusts provide huge benefits at low cost. The reason you have not heard about them is likely because the rules surrounding IRAs are very involved, which cause many professionals to avoid the issue. This avoidance could cost your family dearly.
If you have any questions about IRA Trusts or any other estate planning topics, please contact our office to schedule a free consultation. For more than two decades Klenk Law has focused only on Estate Law. We’ve seen it all, and this experience allows us to explain complex estate planning techniques clearly and concisely. We make it easy for you to understand IRA Trusts and estate planning so you can make the best decisions for yourself and your family.
Peter Klenk is the founding member of Klenk Law, a seven attorney boutique estate planning law firm. We serve clients in Pennsylvania, New Jersey, New York, Minnesota and Florida. Peter Klenk received his Masters in Taxation LL.M. from NYU Law School and his J.D. from the University of Minnesota Law School. He served his country in the Navy JAGC during Desert Storm. Easy to talk to, feel free to call Peter for an appointment. We will make the process as easy as possible!
"I worked for Peter Klenk for 4 wonderful years. I can’t speak highly enough of everyone at the firm. Everyone truly cares about their clients and has a strong sense of responsibility to get things done right. I would highly recommend Klenk Law!"
Flora Novick
Peter recently gave a presentation about Wills & Trusts at my employer, and it was fantastic! He was extremely knowledgeable and provided valuable information to the group. People were very engaged and asked several questions, all of which Peter thoroughly answered. Personally, my husband and I have selected Peter to help us with our estate planning, and he has been very helpful in providing us with all of the information we need to provide a secure future for our family. Thank you, Peter!
Peter and his staff handled all of our needs in a very professional and timely matter.
I met Peter soon after he started his practice in Philadelphia, PA. He and his team have always been there for me and my various inquiries throughout my life-changing events, corporate relocations. I have lived in various cities throughout the nation, I have never had a problem in contacting Peter or a member of his team. He and his office responds quickly and returns calls to me to fulfill my requests for information or to revise my estate needs while posing relevant thought-provoking questions that I need to consider to secure my future. One of Peter's best qualities is his ability to answer clients complicated questions in a simple way to ensure comprehension.
Integrity, exceeding the client's expectations. In-depth knowledge of the law
Peter is excellent. I had a very complicated situation with my parents' estate planning and potential Medicaid needs. Peter was very knowledgeable in estate planning matters, able to define the best solution for the situation. Additionally, he was congenial and able to communicate effectively to my senior citizen parents the benefits of estate planning. He earned my trust, and more importantly, my parents' trust in a 45 mins consultation period. Highly recommend Peter. He is very easy to work with.
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