Share on Facebook
Share on Twitter
Share on LinkedIn

What are the benefits of placing your retirement assets into a revocable trust?

Working Americans may contribute significant assets to their individual retirement accounts over their lifetime.  With so much wealth becoming concentrated in IRA accounts, it is worth considering placing your IRA funds within a trust.  An IRA trust is a revocable living trust that is designed to be the beneficiary of your IRA assets upon your death.  This type of trust can come with several key benefits, including protection from the beneficiary’s creditors and the ability to spread out distributions.  Our Tampa estate planning lawyers discuss IRA trusts and how they might benefit your family below.

 Setting Up an IRA Trust 

An estate planning lawyer will assist you with setting up an IRA trust.  This type of trust is revocable, meaning that you can alter it if needed.  The trust will itself be the beneficiary of the IRA funds, but it will hold the funds for the benefit of your named loved ones.  Within the trust, you can create separate subtrusts to go towards different loved ones. It is possible using subtrusts to set up the trust as a type of dynasty trust that will continue for future generations.


The Benefits of an IRA Trust 

There are several reasons why you may elect to place your IRA assets within a trust, rather than simply name a beneficiary who will receive the assets upon your death.  One main advantage of IRA trusts is the possibility for asset protection.  IRAs are generally protected from creditors while the account holder is living.  However, once they pass to the named beneficiary, the assets can be seized by creditors to the beneficiaries. 

With an IRA trust, assets that pass into a subtrust will be protected per the terms of the trust from lawsuits, creditors, and divorcing spouses, so long as the assets remain within the trust. These protections could prove vital should a beneficiary find themselves in need of declaring bankruptcy, in the midst of a lawsuit, or in a messy divorce.

Trusts hold the ability to structure distribution of the assets in a way that is simply not possible with a regular IRA account.  For instance, with an IRA trust, you can limit the amount of funds accessible by the beneficiary or limit what the funds can go towards.  The IRA trust can even be set up as a special needs trust.  Using the flexibility of a trust, you can distribute the assets to not just one beneficiary, but to multiple generations of heirs.  Ask your estate planning attorney to help you determine whether an IRA trust is the best option for you.