Designing a retirement inheritance trust
California parents who are preparing their estate plans may be concerned about the future financial well-being of their children. They may have more options for an individual retirement account than simply passing the account on to a beneficiary. Having a trust be the beneficiary of the IRA can increase wealth for the next couple of generations.
One of the dangers with an IRA is the taxes incurred by the beneficiary. This is the case even with a regular revocable trust. However, it is possible to design a retirement inheritance trust that protects the wealth in an IRA from taxes and may increase its value. The rules for creating this kind of trust are strict.
A retirement inheritance trust has a number of other benefits. It can protect wealth for minor children and grandchildren. It may also protect the asset from divorce or creditors. People who receive supplemental Social security or other government benefits would still be able to draw on the trust, but the assets would be protected from an irresponsible family member. In complex blended family situations, a trust would help prevent the retirement assets from passing to the wrong people.
Whether or not people have substantial assets, they may want to work with an attorney to design an estate plan. An error in a simpler document like a will or a complicated arrangement like a retirement inheritance trust can result in a person's wishes not being carried out. An attorney might also be able to assist in drawing up documents that address the possibility of a person's incapacity such as a power of attorney and an advance health care directive.