Using Your Retirement Funds to Create a Lasting Legacy

by Julia Leigh Dean on Jun. 06, 2019

Estate 

Summary: Using Your Retirement Funds to Create a Lasting Legacy

For many Americans, retirement funds are the largest asset that an individual owns, other than a house. Many retirement accounts have a child or family member named as a beneficiary in case the account owner passes away before using all their funds. However, retirement accounts are usually considered the worst asset to inherit because many beneficiaries withdraw the entire account balance in a lump sum and are taxed on the entire amount at the highest tax rate. Also, if a child is named as a beneficiary on a retirement account outside of trust, the child risks losing those funds to creditors. That is because funds in an inherited rollover IRA are not considered “retirement funds” and therefore do not receive the same creditor protections as personal retirement accounts. One solution for protecting loved ones from losing most of their inheritance is using a Retirement Inheritance Trust. A Retirement Inheritance Trust is a specialized trust for retirement funds received in inheritance. It is designed to protect what is usually a person’s biggest asset and increases the value of that asset, benefiting future generations. Using a Retirement Inheritance Trust will allow your loved ones to take out required distributions based on their life expectancy, therefore reducing a large tax bill. Meanwhile, the money in their inherited retirement account is growing, compounding interest each year, thus resulting in the account multiplying in size. For Traditional IRA accounts, these funds will grow tax-deferred, and for Roth accounts, these funds will grow tax-free. Also, the funds will be protected in trust from creditors, will not be divided in divorce, and will not be considered part of that beneficiary’s estate for estate tax purposes. By using a Retirement Inheritance Trust to distribute your retirement funds, you are able to provide your loved ones protections from creditors, divorce, and an estate tax bill on the funds when transferred to the next generation. It is a gift to your loved ones that allows you to leave a lasting legacy. If you are interested in using a Retirement Inheritance Trust for your retirement accounts, consult with experienced estate planning attorney. Julia Dean is the managing attorney at The Dean Law Firm, PLLC, a boutique law firm practicing in estate planning, probate, guardianships, elder law, and civil appeals. Mrs. Dean has been recognized as a Top Attorney and Leading Advisor by Acquisition International, Forbes, Newsweek, H Texas, Houstonia, and the Sugar Land Sun, and has earned Martindale-Hubbell’s Client Distinction Award. The Dean Law Firm is committed to bringing you peace of mind by providing thoughtful estate planning for your family.

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