If you have significant wealth tied up in your individual retirement account, it is likely that you may not use it all before you pass away. That makes it important to designate the right beneficiary for the account and, in some cases, that might mean designating a trust.
One of the things people often overlook when they are considering estate planning, is what to do with their retirement accounts. Many people have enormous sums in their IRAs and they will not use them all during their own retirements.
Any funds left over after the account holder passes away, will go to the designated beneficiary on the account. Because this can amount to a lot of money for the beneficiary, it is very important to plan for what that might mean for the rest of your estate.
You might want to know whether you would be better off designating your IRA to a child or designating it to a trust of which the child is a beneficiary. Either is possible as the Wills, Trusts & Estates Prof Blog discusses in "IRA Trusts After the Tax Cuts and Jobs Act."
As with most things in estate planning, the answer for any person depends on individual circumstances. Generally, designating a trust as a beneficiary can allow the ultimate beneficiary to take the money out more slowly, protect the funds from creditors and pay a lower tax rate. However, for that to work, the trusts must be very carefully crafted as any deviation from IRS rules can result in stiff penalties. Therefore, schedule an appointment with a Cincinnati estate planning attorney to discuss doing this.
Remember: “An ounce of prevention is worth a pound of cure.” When making your estate plans or when probating an estate or administering a trust, do not go it alone. Be sure to engage a Cincinnati estate planning attorney.
For more information about estate planning, probate or trust administration in Cincinnati (and throughout the rest of Southwest Ohio) and to review free resources regarding estate planning, probate or trust administration, visit my website. If you have questions regarding this article or a particular legal matter, feel free to contact me at 513-399-PLAN (7526).
Reference: Wills, Trusts & Estates Prof Blog (Jan. 26, 2018) "IRA Trusts After the Tax Cuts and Jobs Act."