According to the Investment Company Institute, the use of IRAs for retirement saving has increased in the past decade, with $6.5 trillion invested in traditional and Roth IRAs.
But how much of those assets will pass beyond the primary beneficiaries to the next generation? Currently, not much. Studies show that individuals who inherit IRAs spend those assets within two years. If you have invested in an IRA and want those assets to last for future generations of your family, then you should consider a trusteed IRA.
The trusteed IRA is a traditional IRA with some estate planning advantages of a trust, and are designed to provide a long-term distribution plan for withdrawals to benefit more than one generation of beneficiaries. Trusteed IRAs are less expensive than setting up a trust, but generally a bit more expensive to administer than a traditional IRA.
Trusteed IRAs are a wonderful tool for those who want to control how their IRA assets are distributed after they are gone. With traditional inherited IRAs, the beneficiary has full say over what happens to the IRA assets he or she inherits. And since most elect to deplete an inherited IRA, future generations will likely never benefit.
A trusteed IRA allows the original owner to dictate how withdrawals can be made. For example, by allowing only the minimum required distribution that the IRS requires heirs to take every year, you can stretch out your IRA over multiple generations since investments grow tax-deferred (traditional IRA) or tax-free (Roth IRA).
A trusteed IRA may also be attractive for blended families, when you want to ensure your IRA assets pass to your children and their progeny instead of going to your second spouse’s new spouse or family.
Another benefit of a trusteed IRA is that if you become incapacitated, the trustee can assume control of the investments and distribution of assets on your behalf without the necessity of having a guardian appointed.
As a Personal Family Lawyer®, I can further advise you on all your options and make things as easy as possible for your family during a Family Wealth Planning Session. If you would like to have a talk about estate planning for your family, call our office today to schedule a time for us to sit down and talk.
To your family’s health, wealth and happiness!
David Feakes
P.S. Want to get started on the most important planning you’ll ever do for your family? Give our office a call at (978) 263-6900 to get started. You’ll be so glad you did.
David Feakes is the owner of The Parents Estate Planning Law Firm, PC – a law firm for families in the Acton, Massachusetts area.David helps parents protect the people they love the most. If you would like to receive David’s exclusive, free report, “Six Major Mistakes To Avoid When Choosing An Estate Planning Attorney,” you can get it right here.
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