When working with clients a frequent question I get asked is if their 401K or IRA should be put into a Retirement Plan Trust. It seems that more often than not, the advice being given is to leave those accounts alone.
Not everyone needs a Retirement Plan Trust but If you fit within the following categories it is something that should be discussed with your estate-planning attorney to see if one is right for you. If you answer yes to any of the below, it’s probably time to update your Estate Plan and consider adding a Retirement Plan Trust.
Are you an individual or couple with combined qualified retirement plans of, at least $200,000.00 or more?
At this level it makes economic sense to use the Retirement Plan Trust, although amount alone is not the only issue, and sometimes it makes sense for someone with a smaller retirement plan to use a Retirement Plan Trust.
Will your beneficiaries make good choices regarding distribution?
A question you can ask yourself is would you be willing to give all your beneficiaries a large sum of money today with no instructions or oversight?
Could a beneficiary lose part of their IRA inheritance in a divorce, bankruptcy, or lawsuit?
Will a person with a minor child(ren) inherit the IRA?
One year’s guardianship alone will more than offset the cost of using a Retirement Plan Trust.
Do any of your beneficiaries qualify for any type of governmental assistance program?
If so, inheriting the IRA will cause them to lose those governmental benefits. Along with Medicare these benefits can also include: school loans, scholarships, grants etc.
Do you have a blended family?
In a marriage where there are children from prior marriage and you don’t want your surviving spouse to disinherit your prior marriage children from the IRA after your spouse dies.
Will one of your beneficiaries become incapacitated?
How can you begin to plan for this? Again, one year’s guardianship alone will more than offset the cost of setting up a Retirement Plan Trust .
If you fit within any one of these categories it would be well worth your time to ask your estate-planning attorney if a Retirement Plan Trust is right for you.