IRA Retirement Trust Attorneys in Valencia
Secure Retirement Benefits for Your Family
Few people fully understand what could happen to their retirement plans
after they pass away. In theory, leaving a retirement plan to a loved
one seems pretty simple. All you need is a beneficiary designation form
where you designate a primary, as well as a contingent, beneficiary. In
real life, however, what happens to retirement accounts after the death
of a plan owner is sometimes surprising.
There are numerous reasons for the surprises. For example, it could be
that your intended (or correct) beneficiaries are not named because a
beneficiary designation form was not updated after a birth, death, marriage,
or divorce, and this lack of follow through results in unintended or disinherited
beneficiaries. Another common shock occurs when retirement plans are left
to children who are not ready to handle the funds. First of all, if the
funds are left to a minor, a court guardianship will likely be needed.
Second, under the SECURE Act passed in December of 2019, most beneficiaries
can no longer stretch out minimum required distributions over their lifespan.
Under the law now, beneficiaries of retirement accounts must take out
retirement funds (and pay taxes) within ten years of inheriting those
accounts. It is important to note however, that there are exceptions for
spouses, disabled/chronically ill beneficiaries, and minors, to name a
few. In these scenarios, it could make a lot of sense to direct retirement
accounts to a “special” trust (e.g., an IRA retirement trust)
so those funds can be managed (and not wasted) for the benefit of your
beneficiaries. On the other hand, you might be wondering why an entirely
different trust is needed, especially for a surviving spouse.
Explore how a IRA Retirement Trust can benefit you and your family today. Call
(661) 306-2500 or
contact us online to get started.
Good question! There are many answers. But let's explore one example to
illustrate the point: many of our clients are in their second marriage
and have a “blended” family. In this situation, when you or
your spouse have children from a prior relationship, sometimes the owner
of the retirement plan wants the plan to provide income to his or her
surviving spouse while he or she is alive, but after both spouses are
gone, the original owner of that retirement plan wants the remainder of
those accounts to go to their beneficiaries (e.g., their children). If
instead of using a Retirement Trust, they just name their spouse as the
primary beneficiary of a retirement account, when both spouses are gone,
the last surviving spouse can leave that retirement account to their children
from a prior relationship (in other words, disinherit your kids in favor
of your spouse’s kids). The surviving spouse could also end up remarrying
an entirely new person and leave your retirement account to a third spouse,
who in theory could ultimately leave any remaining funds in the retirement
account to children outside of both of the original relationships, or
to anyone else for that matter. That is, if you leave your retirement
account(s) to someone, they can later leave it to anyone else, defeating
any intent you might have to leave the remainder of your retirement account(s)
ultimately to your heirs. In these situations, an IRA Retirement Trust
is incredibly important.
Also of concern is the 2014
Clark vs. Rameker Supreme Court case in which the high court ruled that inherited IRAs are
no longer protected in bankruptcy. The ramifications of this decision
reach far and wide. Today, divorcing spouses, business partners, foreclosing
banks (of your beneficiaries) and others, can potentially attach the inherited
retirement accounts (which came from you!). Still, you can provide a certain
degree of protection for your children (or other beneficiaries) by utilizing
an IRA Retirement Trust. Given the frequency of divorce, bankruptcy, lawsuits
of any kind, etc., many parents like knowing that their retirement accounts
are locked up for a good period of time for the benefit of their beneficiaries,
and not their beneficiaries’ creditors.
