The purpose of any trust is to protect assets and wealth and to provide administration and distribution to the beneficiaries. An IRA Trust is no different.
An IRA Trust deals specifically with IRAs and can be drawn by the “grantor,” or the individual who created the trust. An IRA Trust is not like a Revocable Living Trust, which concentrates on averting probate and placing assets squarely into the hands of the name beneficiaries upon the death of the grantor. An IRA Trust should be set up as part of a comprehensive estate plan.
If you have over $100,000 in an IRA, this trust can help reduce tax consequences by allowing long term income tax deferral. Usually when the beneficiary of an IRA elects to begin drawing on the IRA, they can take a lump sum or elect to take minimum distributions each year. By taking the annual distributions, the beneficiary will still be diverting income tax by leaving a portion in the account. With an IRA Trust, this will automatically occur, allowing more income from the IRA.
Additionally, the beneficiary is protected from frivolous lawsuits and still maintains control of the IRA.
As with any trust, it should be customized to each individual. It’s not a one-size-fits-all scenario. You can set it up to accommodate your future plans.
While there are many pros and cons to getting any type of trust, it’s important to contact experts who will guide you in your decision, not make the decision for you. At Ourednik Law Offices, our attorneys have experience with all types of trusts and can assist you in drafting one that will be advantageous to you and your beneficiaries.