Estate Planning Meets Retirement Planning - NYT Article on How to Give an I.R.A. to Beneficiaries Without Giving Up Control

Kate Thornton/New York Times

An interesting New York Times article "How to Give an I.R.A. to Children Without Giving Up Control" (11/18/16). Some may have never heard of a Trusteed I.R.A. which allows the funds to be distributed to beneficiaries and control how someone uses the money so it's not squandered or ill-spent. For clients who have large I.R.A. holdings (over $500,000), this may be a wise option or at least something to consider.

It also allows the assets in the I.R.A. account to be broken up into separate accounts for the beneficiaries. Each account can have different guidelines on when and for what distributions are made and take into account their age.

One advantage is that there is better asset protection for the beneficiaries. In 2014, the U.S. Supreme Court rule that funds held in traditional I.R.A.s that are inherited do not have the same protection as retirement assets. Another benefit is if the I.R.A. owner becomes incapacitated where the trustee can request the minimum distribution since without the owner reqeuest there can be a large penalty.

There is the option of creating a trust and putting the I.R.A. into it but that can cause issues with the I.R.A. especially where there is a spouse and can be more expensive. Trusteed I.R.A.s have management fees so that is one reason why they are usually recommended if the account is large.

Trusteed I.R.A.s have their limits and anyone thinking of a Trusteed I.R.A. should consult an experienced attorney to draft the documents, consider it in the context of retirement and estate planning.

Posted by Henry (Hank) Moravec III
Email: hm@moravecslaw.com
Office: 626-793-3210