Investing money in an Individual Retirement Account is a secure financial planning decision. A great deal of protection has been afforded to the money set aside specifically for retirement. Included with these protections is the ability to shield your retirement assets from creditors.
In the past creditor protection afforded by placing your assets in designated retirement accounts extended to the beneficiaries of those accounts. Any retirement assets passed to children or other beneficiaries would enjoy the same level of creditor protection they did when they were first set aside.
In June of last year, the Supreme Court stripped inherited IRAs of their creditor protection making these assets available to the creditors of your heirs and legatees. This major change in the exempt status of inherited IRA accounts has motivated estate planning professionals to look for new ways to protect retirement assets from creditors.
The need to restore creditor protection while maintaining the favorable tax treatment of IRAs makes adding a Stand Alone Retirement Trust to your estate plan worth considering. When drafted properly, the Stand Alone Retirement Trust has the power to protect inherited IRAs from creditors, including a beneficiary’s divorcing spouse.
Also, the Stand Alone Retirement Trust will allow your beneficiaries to stretch out the distribution of retirement funds and enjoy the favorable tax treatment afforded these assets by the IRS. Traditional revocable trusts can not accomplish this.
Consult your estate planning attorney for further information.