An IRA trust protects the wealth of an individual retirement account for beneficiaries by establishing a trust. The grantor can control distribution and set aside a portion for estate taxes. The trust is the direct beneficiary, and the grantor can nominate individuals. The trust must be legal, identifiable, and irrevocable. The trustee cannot deplete the original IRA funds, and the grantor can decide how the funds will be distributed. The trust can allocate funds for paying taxes on affluent property.
An IRA trust is a method of leaving wealth in an individual retirement account, or IRA, that is intended to protect the account’s wealth for the beneficiaries of the trust. Instead of leaving the assets of an IRA to a person such as a child or grandchild, an IRA trust would establish a wealth trust and then establish the beneficiaries for that trust.
In this way, the grantor of the trust helps establish that the IRA assets are protected from any financial hardship that may befall the beneficiaries. Other benefits of this arrangement include the ability of the trust grantor to control how and when the wealth is distributed and the opportunity for the grantor to set aside a portion of the trust to pay estate taxes.
By establishing an IRA trust to receive the assets of an individual retirement account, an individual can better control the distribution of wealth within and help that wealth survive any unforeseen circumstances that may affect descendants of the family or other persons named as beneficiaries. The trust itself would be the direct beneficiary instead of one person, but then the grantor can nominate individuals such as children or grandchildren to benefit from the trust account. For an IRA trust to be legal, it must be a valid trust under state law, the beneficiaries of the trust must be identifiable, and the trust must be irrevocable upon the death of the grantor.
Once the trust is established, the IRA assets are distributed to the beneficiaries of the trust as stipulated by the grantor. This means that the wealth is protected against any debts accumulated by the beneficiaries, because the trust itself is the direct beneficiary. For example, the grantor’s child facing an expensive divorce could use his established share of the trust to help pay his ex-spouse, but could not liquidate the trust assets.
With these same guarantees in place, a trustee who was fiscally irresponsible could not get his hands on the bulk of the trust and thus deplete the original IRA funds. The trust also allows the grantor the leverage to decide how the funds will eventually be distributed. For example, the grantor can ensure that the original beneficiaries are his children, and then, upon the eventual death of the children, the trust can assign the grandchildren as beneficiaries of the trust rather than the children’s surviving spouses.
One of the other benefits of an IRA trust is that it can be set up to ensure that taxed properties are paid for. Financial hardships of beneficiaries could make it difficult for them to pay taxes on affluent property. An IRA trust may allocate a certain amount to be placed in escrow for the sole purpose of paying those taxes.
Protect your devices with Threat Protection by NordVPN
