Stand Alone Retirement Trusts
What is a Stand Alone Retirement Trust?
Stand Alone Retirement Trust
Suppose you have an Individual Retirement Account (IRA), which is not fully depleted at the time of your death. Where do you want that money to go, and how do you want it to be distributed? While you can name a specific beneficiary (or beneficiaries) of your remaining IRA funds, you should consider whether or not you want the beneficiary to be able to receive the IRA proceeds in a lump sum payment after your death. Negatives of the lump sum approach include unwise spending decisions and significant tax liability.
Stand Alone Retirement Trust Helps Plan for the Unexpected
If you do not feel comfortable with the beneficiary receiving the money all at once—perhaps he or she is still very young or has a history of being irresponsible with money—you might prefer that he or she not have the option to receive the funds in a lump sum. In such situations, a Stand-Alone Retirement Trust might be a useful tool to consider. A Stand-Alone Retirement Trust is a Trust that is created for the sole purpose of serving as the beneficiary of the remainder of your IRA funds (and other qualified funds, e.g., 401(k)). Thus, the Trust will be funded after you pass with whatever is left of your retirement assets. Then, the trustee of the Stand-Alone Retirement Trust will oversee the distribution of the funds to your heir(s) in a manner you see fit.
Other Benefits of a Retirement Trust
- Asset protection in the event of a divorce
- Asset protection from creditors
- Generation-Skipping tax benefits
- Protects the beneficiary with respect to government needs-based benefits
- Alleviates the need for a court-appointed guardian for minor beneficiaries
- Asset protection in the event the beneficiary becomes incapacitated
- Allows for successor beneficiaries
- And more.
