Did you know that leaving tax-qualified retirement assets as an inheritance to non-spousal loved ones comes with certain risks that a Standalone Retirement Trust can help avoid? For example, regardless of how long it may have taken to build tax-deferred growth in an IRA or 401k, leaving unspent funds to adult children or grandchildren could expose them to:

  • Preventable income tax liabilities, 
  • Creditors pursuing debts, and 
  • The temptation to spend your hard-earned retirement money quickly. 

Let us share important information with you on this critical aspect of your Florida estate planning.

Why could this happen? One reason is because tax-advantaged retirement accounts can lose their protections once they are inherited. Plus, recent changes contained in the SECURE Act of 2019 have destroyed the longstanding practice of “stretching” annual required minimum distributions (RMD) of inherited IRAs and other tax-qualified retirement assets over the life of the beneficiary. Stretching was a way of continuing the tax-deferred growth of the asset while limiting annual income tax exposure due to smaller RMD payouts. Now, beneficiaries must liquidate an inherited retirement account within ten years or face a stiff tax on the entire balance.

The good news is that a Standalone Retirement Trust resolves these issues, and much more. Let us share a few of the benefits using them can add to your estate plan:

  • Asset protection from creditors
  • Multi-generational tax benefits
  • RMD stretching over the lifetime of a beneficiary
  • Steep tax consequences for beneficiaries seeking to liquidate and spend
  • Reduced confusion over shared assets in a divorce
  • Trustee supervision for beneficiaries who become ill or incapacitated
  • Shielding special needs beneficiaries from exceeding income limits tied to government benefits
  • Protection for minor children who might otherwise require court appointed financial intervention. 

Through your estate planning, instead of leaving the unspent retirement account funds directly to your non-spousal beneficiaries, you can leave the funds to the Standalone Retirement Trust. This can be a separate Florida estate planning vehicle from your existing will or living trust, and it can become both the beneficiary and the repository of leftover retirement account monies after your passing. Your children, grandchildren, or other named heirs can become the beneficiaries of the trust. Further, your handpicked trustee can oversee the distribution of the funds according to any instructions you may want to leave behind, with all the above benefits applying. 

We know this blog may raise more questions than it answers. If you or someone you love would like to learn about a Standalone Retirement Trust, or receive guidance concerning their many benefits, we encourage you not to wait to meet with an experienced estate planning attorney. We look forward to assisting you with your estate planning now, or at any time in the future.