Retirement Plan Trust/IRA Trusts

Retirement plan trusts, or IRA trusts, are trusts that act as vessels for your IRA funds to pass from you to your heirs while incurring minimal loss from asset maintenance or inheritance taxes.

There are two types: conduit trusts and accumulation trusts. Each offers a different set of advantages when it comes to planning your estate.

Conduit Trusts

This type of trust acts as a very straightforward link between your IRA and your intended beneficiary. The trust is named as the beneficiary of the IRA, and an individual is named as the beneficiary of the trust. This makes the conduit trust the middleman, facilitating any easy transition of funds and protecting the IRA funds from creditors.

Conduit trusts have a series of required minimum distributions necessary after the original IRA owner passes away. The trust beneficiary must calculate and withdraw a mandated amount each year.

Accumulation Trusts

Though more complicated, accumulation trusts are often a perfect solution for those looking to maintain wealth over several generations, or to protect assets when the beneficiary may face litigation. This is because they do not have required minimum distributions, and they can serve as a vessel for your IRA to grow in for years to come.

Although accumulation trusts avoid inheritance taxes, they are charged regular income tax on their gains. The rate at which they are taxed depends on several factors that change over time, so it is best to decide whether this trust is right for you with the help of a professional who understands both your finances and your wishes for your estate.

Bankruptcy Protection

IRA trusts are particularly useful in situations where an heir is at risk for bankruptcy. Deciding whether an IRA trust or a spendthrift trust is right for your situation can be tricky. At Millman Law Group, we offer free consultations where we can help further explain the differences and start evaluating which solution would work best to protect your heirs.