Individual retirement accounts are among the most popular ways that people in Florida save for their senior years. IRAs allow for the designation of a beneficiary who will get the funds in the event that the account creator dies before the funds are exhausted. While it is common to name a family member as the beneficiary of the IRA, another positive estate planning option is to name a trust as the beneficiary instead. This option gives the creator the most control over the assets after death.
Trusts can be designed to direct the paying out of funds based on the wishes of the trust creator. Designating a trust as the IRA beneficiary can be advantageous in situations where the beneficiary would otherwise be a person who needs oversight regarding the funds. Examples include a minor child, person with special needs or someone likely to spend frivolously. Naming a trust as the beneficiary can also protect the funds from creditors.
If the estate owner has a child who has problems with debt, directing funds into a trust can keep them out of reach of creditors. This is because the trust owns the funds rather than the trust beneficiary. In cases where the estate owner wants IRA funds to transfer to a spouse, designating a trust may not be the best option. When spouses inherit IRA funds, they generally have the option to roll the money into another IRA without paying taxes.
People in Florida who have questions about the operation of IRAs or trusts as estate planning vehicles might want to speak with a lawyer. An estate planning attorney may examine the facts of a client’s situation and recommend trusts designed to maximize tax advantages. Legal counsel could then draft the documents necessary to help establish a plan that meets the client’s needs and goals.
