A retirement account is usually the most significant asset a person owns. Through estate planning, people in New York can make sure that their heirs will get the most benefits from what remains of their retirement assets after their deaths. Trusts are particularly helpful for achieving this goal — specifically, the typical revocable trust.
Trusts are beneficial, as passing an inherited IRA to a loved one outright offers little protection against the incorrect people eventually getting the IRA. This is especially a problem with blended families or with children from prior relationships. Passing on the IRA outright also does not offer much protection against poor money management and a beneficiary’s questionable spending habits.
Another threat is that the spouse of a beneficiary may take the money as part of divorce proceedings. Also, the beneficiary may end up losing the retirement funds in order to qualify for Supplemental Security Income, which is a needs-based government benefit. A beneficiary may also, unfortunately, lose the benefits as a result of bankruptcy, a lawsuit or creditors’ claims, or the funds could be impacted by an estate tax, if the beneficiary passes the retirement account to the following generation.
A retirement inheritance trust that is properly created and funded in New York may help to provide huge protection from bankruptcy, creditors and divorce in the future. It is particularly fitting for beneficiaries who are minors. Proper legal guidance may help people to set up trusts in ways that will protect not just their interests but also those of their children and even grandchildren.
Source: nasdaq.com, “Trusting Trusts to Maximize Benefits to Heirs”, March 29, 2016