Two of the greatest benefits of a traditional or Roth IRA are the tax advantages and protections against creditors. The U.S. Supreme Court has ruled that once an IRA is transferred to a beneficiary, e.g., your children, the IRA loses the protections against creditors.
Click here to read the unanimous opinion. The Supreme Court decided that once an IRA is inherited, it loses the characteristics of a "retirement fund" and, as a result, your beneficiaries creditors can go after it.
Fortunately, there is a way to add creditor protection to the IRA - the Standalone Retirement Trust. Here are some of the benefits of a Standalone Retirement Trust:
- Protects the inherited IRA from each beneficiary's creditors as well as predators and lawsuits;
- Insures that the inherited IRA remains in your bloodlines and out of the hands of a daughter-in-law or son-in-law, or, more importantly, a former daughter-in-law or son-in-law;
- Allows for experienced investment management and oversight of the IRA assets by a professional trustee;
- Prevents the beneficiary from gambling away the inherited IRA or blowing it all on exotic vacations, expensive jewelry, designer shoes and fast cars;
- Enables proper planning for a special needs beneficiary;
- Permits you to name minor beneficiaries, such as grandchildren, as immediate beneficiaries of the inherited IRA without the need for a court-supervised guardianship; and
- Facilitates generation-skipping transfer tax planning to insure that estate taxes are minimized or even eliminated at each generation of your family.
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