IRA Assets: When Should They Be Given in Trust?

You accumulated substantial retirement assets in an IRA. Most likely, it will be beneficial to leave your retirement account to your spouse, if you are married, by beneficiary designation. Your spouse can elect to hold the asset as an inherited IRA or treat it as their own. Generally, surviving spouses receive protection from creditors when inheriting an IRA. Also, a spouse receiving an IRA benefit can “stretch” the distributions from the IRA for longer than a non-spouse beneficiary in most cases.

What about non-spouse beneficiaries of an IRA? Sometimes, it makes sense to make the IRA payable to a trust we have drafted. First, a non-spouse beneficiary will not benefit from creditor protection on the inherited IRA. So if he or she has creditors or is in a high liability profession, consider leaving it to a trust for his person. Second, an addict, mentally unwell person or someone who cannot manage assets should not receive an IRA in their own name. Holding it in trust is beneficial, because a trustee can make certain that it is managed (and not liquidated) for necessaries. For addicted family members, the trustee can even make certain that funds are not disbursed to someone in the throes of addiction.

There are many factors to discuss as we decide whether your IRA should be left outright or in trust to a beneficiary. Contact us to set up a consultation for this purpose.