Do you have an individual retirement account or other type of retirement account that you plan to leave to your loved ones? If so, proceed with caution! Inherited retirement accounts do not have asset protection when they pass to your loved ones, meaning creditors can seize the money in the accounts to satisfy any claims against your beneficiaries.
How Can Inherited Retirement Accounts Be Protected?
Fortunately, retirement accounts can be protected, but only if you take action. Enter the standalone retirement trust (SRT). An SRT is a special type of trust which can protect retirement accounts, and provide the grantor with peace of mind knowing their accounts will pass along to their beneficiaries, not their creditors.
A properly drafted SRT can do all of the following:
- Protect the inherited retirement accounts from creditors, predators, and lawsuits
- Ensure accounts remain in your family and out of the hands of a child’s spouse or ex-spouse
- Allow for experienced investment management and oversight of the account funds by a professional trustee
- Prevent the beneficiary from gambling away the account or spending it all on lavish lifestyle purchases
- Provide proper planning for a special needs beneficiary to avoid disqualifying the beneficiary from receiving needs-based government benefits
- Allow you to name minor beneficiaries, such as grandchildren, without the need for court-supervised guardianship
- Facilitate generation-skipping transfer tax planning to ensure taxes are minimized or even eliminated at each generation of your family
The Bottom Line
We are here to help you navigate the best strategy for protecting these accounts from your beneficiary’s creditors. We look forward to hearing from you soon.
Give Us a Call
Nielsen Law PLLC provides family focused estate planning to individuals and families in Austin, Round Rock, Cedar Park, and the Central Texas area. For more information and to learn about our firm, please contact us.