Using an IRA Trust to Protect an IRA from Creditors
IRAs and creditors became a hot topic due to a case that went all the way to the Supreme Court recently. The Supreme Court found in favor of the creditors. The inherited IRA owners had filed for bankruptcy, but were attempting to have the IRA declared a retirement fund. This didn’t fly in the courts because while the money could have been used after retirement, there are no penalties for removing money from an inherited IRA before any particular age. Thus, it’s not viewed by the courts as any more of a retirement fund than a checking account or a stash of money in someone’s mattress.
As a result, the $300,000 in the IRA ended up being counted as assets when it came to settling up debts. No one wants their retirement money or an inheritance for their children to end up going to greedy creditors. This makes an IRA Trust a better option.
What Makes an IRA Trust Different?
An IRA Trust is different from an inherited IRA in several significant ways. It protects the asset, so if the beneficiary is being sought after by creditors, the IRA is not affected. Also, there are additional tax benefits. The Trustee is given certain privileges in caring for and preserving the Trust for the future beneficiary. All of these advantages set an IRA Trust apart from an inherited IRA. But how can you know which one is right for you?
For example, what if you already have an existing Trust? It may qualify as an IRA Trust. You can also reconcile your retirement benefits along with the rest of the estate.
Get Some Experience in Your Corner
Our experienced lawyers at the Petrov Law Firm would be happy to help in this regard. Whether you need help with estate planning, IRA Trusts, tax benefits, or retirement, we can help you to be prepared for the future.