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Friday, January 25, 2019

Plan Carefully to Pass Down Your IRA Assets

Can a trust be the beneficiary of my IRA?

Individual retirement accounts have become a significant asset for most Americans. According to the Investment Company Institute, Americans hold over $9.2 trillion in individual retirement accounts (IRAs). Over 43 million people own IRAs and these accounts have an average balance of over $100,000. With such significant wealth in IRAs nationwide, it becomes critical for IRA holders to plan for the transference of their assets to their heirs. Failure to plan could result in taxation and potentially less than ideal circumstances for your loved ones. Our Tampa estate planning lawyers suggest some tips to plan for the passage of your IRA below.

Placing Your IRA in a Trust

 Most of us will name a spouse or child as the beneficiary to our retirement account. However, your child or at times even your spouse may not handle a lump sum payment well. Your spouse may have creditors that attempt to seize the assets. For minor children, issues then arise as to who will manage the funds for them. Even older children could be unable to properly manage large sums. Additionally, collecting on the IRA assets can lead to taxation.

 To protect your heirs and your IRA assets, you should consider creating a trust who will be the beneficiary to your assets. In doing so, you can control how and when your heirs receive the assets. You can also potentially reduce taxation of these funds. You will need to ensure, however, that you follow some critical steps to allow your IRA account to transfer to your trust. There are several conditions that your trust must meet in order to lawfully become the designated beneficiary. First, you must set up a trust that is valid per your state’s law. It will need to be an irrevocable trust or one that becomes irrevocable upon your death. Further, your IRA custodian must receive a copy of the trust by October of the year following the year of the IRA owner’s death. Lastly, the IRA beneficiaries must be named in the trust and they must be actual people, as opposed to charities. Consult with an estate planning lawyer to get started protecting your heirs and IRA assets as soon as possible.


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