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Charleston Estate Planning & Asset Protection Blog

Tuesday, April 24, 2018

What is an IRA Trust?

Individual Retirement Accounts (IRA) are used by many people as part of retirement planning. An IRA allows a person to benefit from tax-deferred retirement savings even when they are not covered under an employer-sponsored retirement plan such as a 401k program. IRAs are also used to transfer retirement plan assets (IRA rollover) if an employee is terminated or leaves the company. Our South Carolina wills and trusts lawyers are often asked about what happens to an IRA upon death.

Inherited IRAs

It is important to remember that beneficiaries take precedence over any terms in your will. As with other financial accounts, you must name a beneficiary when you open your account. Therefore, the money in your IRA passes to the beneficiary upon your death, regardless of the other terms of your will. The beneficiary can use the money in the IRA in whatever manner he or she wishes, provided minimum distributions are made according to IRS requirements.

If you are worried about a beneficiary because he or she does not manage money well, there is something you can do. You can name a trust as your beneficiary to control how the funds in the IRA are used after your death. In addition, by naming a trust as the beneficiary, you can protect the funds from debts that your heir may owe.

Creating an IRA Trust

An IRA trust provides a great amount of flexibility to provide for your loved ones after your death. The trust is a special type of revocable living trust that has the sole purpose of managing your IRA accounts after your death. Because this is a revocable trust, a benefit is the ability to change the terms of the trust if circumstances change.

To transfer the IRA accounts into the trust, you must name the trust as the beneficiary on all accounts you want to be managed by the trust. Upon your death, the IRAs are transferred into the trust and are managed according to the terms set forth in the trust agreement. In other words, the IRA trust becomes the owner of the accounts.

How Does the Trust Disburse Assets?

Required minimum payments from the IRA are paid to the trust as the beneficiary. The terms of the trust dictate how the funds are to be managed. In an accumulation trust, the trustee uses the funds for the benefit of the trust’s beneficiary at the discretion of the trustee. With a conduit trust, the minimum distributions are paid to the beneficiary as the trust receives the payments. In either case, the beneficiary is not able to withdraw funds at will nor is his creditors able to touch the funds within the IRA trust.

The flexibility of an IRA trust allows you to create sub-trusts within the trust, creating a legacy for your family through lifetime dynasty trusts.  However, these trusts must be very carefully worded and drafted to ensure they meet all the conditions to protect against accelerated withdrawal requirements.

Do You Want More Information About IRA Trusts?

If you need help with estate planning or trusts, schedule a consult with one of our South Carolina will and trust lawyers. Our team assists clients with estate and retirement planning. We can help you protect your assets and your family.


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Wiles Law Firm, LLC helps clients with their estate planning needs in Charleston, South Carolina and the surrounding areas such as West Ashley, Summerville, North Charleston, Mount Pleasant, and John's Island.

Information on this website is not legal advice. Further, viewing of the enclosed information does not create an attorney-client relationship with Wiles Law Firm, LLC. Matters will be handled by attorneys who primarily practice out of our office in Charleston County located at 852 Lowcountry Blvd., Ste. 101, Mt. Pleasant, SC 29464. M. Emerson Wiles, III is the attorney responsible for this advertisement.

Any result Wiles Law Firm, LLC may achieve on behalf of one client in one particular matter does not necessarily indicate similar results can be obtained for other clients. Please contact a South Carolina estate planning attorney or one of our attorneys with Wiles Law Firm, LLC for a consultation regarding your unique estate plan.



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