Why Do I Need a Retirement Trust? from Austin Estate Planning Attorney Liz Nielsen

Protect Your Retirement Accounts by Austin estate planning lawyer Liz Nielsen

Your retirement account provides asset protection during your lifetime, but as soon as you pass that account to a loved one, that protection evaporates.  When a loved one inherits your retirement account, creditors can seize it and use the funds to satisfy their claims.  All it takes is one lawsuit and your life savings could be gone, leaving your loved ones penniless.  Fortunately, this can be avoided by using a Standalone Retirement Trust (SRT) to protect inherited retirement accounts from creditors.

You want your loved ones to benefit from your retirement accounts, not the creditors.  If you or your beneficiaries fall into any of these five categories, you should seriously consider establishing an SRT:

1. Substantial Combined Retirement Plans

Loved ones can use an SRT to protect retirement plans from creditors.  This is particularly important when retirement accounts have a significant face value.

2. Concerns Regarding the Beneficiary’s Frugality

SRTs are particularly useful if you are concerned with how a beneficiary will use their fraction of the inheritance.  This unique type of Trust provides oversight and instructions regarding when and how they receive their fraction of the inheritance and how it is to be spent.

3. Protecting Retirement Plans Against Legal Action

If a beneficiary is currently engaged in an ongoing legal battle, SRTs can be used to protect these assets from potential creditors.  Whether it is filing for divorce, bankruptcy, or any other form of legal action, a properly drafted SRT will help ensure that the decedent’s assets will pass along to their loved ones, rather than to the opposing party.

4. My Beneficiary Receives Assistance

If a beneficiary receives, or may qualify for, a needs-based governmental assistance program, it is important to know that inheriting an individual retirement account may cause the beneficiary to lose those benefits.  However, SRTs can be drafted to avoid any disqualification and continue to allow your beneficiary to receive any governmental assistance required.

5.  Married With Children from Previous Marriage

Naming your current spouse as the retirement account’s primary beneficiary can allow your spouse to unintentionally (or intentionally) disinherit the children from your previous marriage.  This can occur even if your children are named as the contingent (backup) beneficiaries of the account.  This can be avoided by naming your spouse as the “lifetime beneficiary” of the SRT.  Following his or her death, the remainder of the account passes to the children.

You worked hard to save money in retirement accounts, so don’t let your beneficiaries’ creditors to take them. Give us a call and let us show you how an SRT can help you protect your retirement accounts.

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.