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How To Turn Your IRA Into A Massive Benefit For Your Family

  • Published: July 13, 2017
How To Turn Your IRA Into A Massive Benefit For Your Family

Ideal Estate Plan

  • AVOID Estate Taxes
  • AVOID Income Taxes
  • AVOID Dissipation of Assets from Irresponsible Spending
  • AVOID Attack from Creditors, Predators, & Divorce
  • AVOID Court Control (Probate, Guardianship, or Conservatorship) as Much as Possible

Is there a way I can avoid taking my Required Minimum Distributions (RMDs)?

At least for “traditional” retirement plans, but Roth IRAs and 401(k)s do not have RMDs during the life of the original account owner.

Why are RMDs necessary?

  • IRS wants to collect taxes as soon as possible
  • Retirement plans are not designed as perpetual tax free zone
  • Retirement plans have an end point measured by the life expectancy of the participant/beneficiary

Options for Distribution of IRA to Family Members

  • Not having a beneficiary named is one of the biggest mistakes people make with retirement
  • Your trust or will do not control, so you must name a beneficiary with the retirement account
  • Outright to Surviving Spouse
  • In Trust for Surviving Spouse
  • Outright to Children or Grandchildren
  • In Trust to Children or Grandchildren

Why You Should Consider a Trust

  • INHERITED IRAs ARE NOT ASSET PROTECTED
  • In a 2014 case (Clark Rameker), the U.S. Supreme Court holds 9-0 that IRAs are not ASSET PROTECTED retirement plans for non-spousal beneficiaries
  • Court’s logic could apply to spousal beneficiaries as well, depending on the facts

Why leave my IRA to a 7 year old?

  • More years of tax-free growth
    • Younger people = longer life expectancy
    • Longer life expectancy = lower RMDs
    • Lower RMDs = More year of compounded tax-free growth
  • Younger people generally are in lower tax brackets
    • Lower payment at lower brackets = TAX SAVINGS
  • Control is ensured. Parent/Grandparent/Spouse can be ‘in charge’ of trust beneficiaries
  • Protection against irresponsible spending
  • Protection from creditors, bankruptcy courts, and judgments
  • Protection against divorce courts
  • Protection against guardianship or conservatorship court control
  • Flexible “post-mortem planning” opportunities that are not readily available with traditional beneficiary form planning
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