A Retirement Trust allows you to achieve optimal income tax advantages from your retirement accounts, while protecting them from your beneficiaries and their creditors.​

The primary benefit of a retirement account, such as an Individual Retirement Account (IRA) or 401(k), is that the income taxes are deferred until a distribution is made. When an IRA holder dies, their next of kin have the option of spreading the distributions over their own life expectancy, which allows for a longer tax deferral, and greatly increases the value of the inherited IRA.

Unfortunately, just because IRA beneficiaries can choose to stretch their distributions, does not mean that they willstretch them. Furthermore, if an IRA beneficiary has creditor issues, due to lawsuits, divorces, etc., then the inherited IRA may be in jeopardy. We can readily protect other types of inheritances from beneficiaries' creditors, but retirement accounts have very specific regulations that prevent us from using more traditional techniques.

Enter the Retirement Trust (also called an IRA Inheritance Trust or a Stretch and Protection Trust). A Retirement Trust is designed to be the beneficiary of your retirement accounts. After you pass away, the Trustee has the option to stretch distributions over the individual life expectancy of each of your beneficiaries, thus achieving optimal tax savings. This is done by separating the Retirement Trust into separate trusts for each beneficiary, and designating them as conduit trusts, because the trust acts as a conduit from the IRA to the beneficiary. And should the beneficiary require any additional funds for a valid purpose, then the Trustee could simply elect to make a larger distribution.

Furthermore, if any of your beneficiaries have asset protection concerns, then the Trustee can toggle the conduit trust into an accumulation trust, which allows the Trustee to accumulate distributions for that beneficiary, and thereby protect the IRA from creditors.

Previously, IRA holders had to choose between mandating optimal tax deferral, and protection from their beneficiaries' creditors. With a Retirement Trust, they can do both.

IT'S OKAY IF YOU NEED HELP

We're glad that you're using this website to educate yourself about these important issues. While it may seem daunting, the most important step is as simple as a phone call or email.

CONTACT INFO

The Law Office of David E. Peterson

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Danvers, MA 01923

978-406-9790

info@deplawfirm.com