Using an IRA Trust

An Individual Retirement Account (IRA) Trust is a special type of Revocable Trust that can house your IRA during your life and allow those funds to be used for your beneficiaries after you pass away. Since an IRA Trust is Revocable, you will retain full control over your Trust and IRA during your lifetime.

When

It is a good idea to use an IRA Trust if your IRA is valued at more than 200,000 dollars. There are several benefits an IRA Trust can offer you and your family when your fund is over that amount.

Why

When you allow an IRA to pass directly to your heirs after your death, you are putting those funds at risk of being spent too quickly. With a Trust you can stretch your IRA disbursements out over the lifetime of your beneficiaries and even their descendants if you wish.

If your beneficiary will have a taxable estate, you can help reduce his or her tax burden by using a lifelong IRA Trust. Funds within the Trust will not be part of your beneficiary’s taxable estate.

Because funds in an IRA Trust will pass into Irrevocable Sub Trusts, your Trust offers asset protection for you and your heirs. Most IRAs offer protection during your lifetime, but if those funds pass directly to your heirs, they may be taken to settle an heir’s debt. You can use a Trust to avoid this.

An IRA Trust is also a great idea for blended families. Your spouse will have use of funds during his or her lifetime and then the Trust will pass to your children. This ensures your children receive a proper inheritance.

How

To use an IRA Trust, you must make a Special Revocable Trust and Sub Trusts. You will name the Trust and Sub Trusts as first and second beneficiaries of your IRA. During your life, you can make changes to your IRA Trust and Sub Trusts since your IRA Trust is Revocable.