Why people may want trusts as the beneficiaries for IRAs

On Behalf of | Apr 4, 2016 | Trusts

For many Nevadans, retirement accounts may be some of the largest or the very largest assets they may leave to their children. Because inherited IRAs may be taxed for each distribution that is made and may be the target of divorce proceedings, among other issues, people who want to leave them to their children may want to make the beneficiary of their IRAs trusts instead of their children directly.

Retirement account trusts can provide multiple types of protection, such as the IRA going to people for whom it wasn’t intended. This can happen in the case of blended families, children from previous relationships and ex-spouses during divorce cases. In a divorce, a spouse will often try to include an IRA as part of the marital estate, receiving a large portion of it. If the IRA is owned by a trust instead of by the spouse, the funds may instead be unreachable.

A trust may also provide a way to protect the balance from the child as well. Some people have problems with spending. Setting up a trust which prevents them from spending freely can help preserve and grow the balance.

People who have individual retirement accounts may want to discuss establishing trusts as their accounts’ beneficiaries with their estate planning attorneys as part of a regular review of their retirement portfolio. A trust can often be set up in a manner that provides the most protection for a client’s IRA, placing it beyond the reach of creditors, spendthrifts, estate taxes and other potential problems.