Asset Protection, Estate Planning, Dynasty Planning, Limited Liability Companies, Small Business

The IRA Dynasty Trust

This page is for informational and educational purposes only. The specific provisions of your particular IRA Dynasty Trust™ will control over this information.

Benefits of Naming Your IRA DYNASTY TRUST™ as the Beneficiary of Your IRA:

Income Tax Deferral. Tremendous wealth accumulation can be achieved if a retirement account is allowed to remain intact for as long as possible. If a retirement account is left outright to a beneficiary, there is nothing to stop the beneficiary from accelerating distributions. Likewise, if the retirement account is payable to a standard revocable trust, the retirement account will have to be completely liquidated within five years of the retirement account owner's death if he were to die before his Required Beginning Date. A standard revocable trust will also not permit individual beneficiaries to calculate the Required Minimum Distributions on their own life expectancy.

Creditor Protection. Creditor protection for your beneficiaries is an important reason for using an IRA Dynasty Trust™. While qualified plans are generally protected under ERISA, a beneficiary's interest in an individual retirement account (IRA) may not be protected from creditors, depending on state law. If a child or grandchild is named directly as an IRA beneficiary, creditors may, under state law, have a right to the asset to settle outstanding debts or tort liabilities (i.e., an automobile accident). With the use of the IRA Dynasty Trust™, many of these concerns are alleviated. The IRA Dynasty Trust™ is also an especially important tool for malpractice purposes if the beneficiary is a successful professional (i.e., doctor, nurse, lawyer, engineer, etc.). A properly crafted trust can help protect the beneficiary from losing the asset altogether in a creditor claim.

Divorce Protection. If an IRA is payable directly to a child or grandchild, the divorcing spouse of the child or grandchild may have a right to a portion of the IRA distributions (this depends upon state law). If the parent had instead named an IRA Dynasty Trust™ as beneficiary for the benefit of the child, the beneficiary would have an additional layer of protection that he or she will be entitled to all of the trust assets designed for their benefit. In this case, the IRA Dynasty Trust™ would prevent distribution to the non-beneficiary spouse.

Spendthrift Protection. Inheriting a retirement account in a multi-generational IRA Dynasty Trust™ can also protect the beneficiary from poor financial decisions. Having the retirement account go through an IRA Dynasty Trust™ protects children and grandchildren from losing the IRA to involuntary seizure by adverse parties. When a retirement account is payable to a child outright, they have the option to withdraw any amount from the account they wish. The temptation to withdraw the entire account may be particularly strong for young beneficiaries. This, of course, results in the loss of many years of tax deferred growth.

Keeping Wealth within the Family. By using the IRA Dynasty Trust™, you, as the retirement account owner, can ensure that the account will continue in your family blood line after the primary beneficiary passes away. If a retirement account goes outright to a child, upon that child's death, she can leave the assets to whomever she chooses, such as a spouse or charity.

Special Needs Planning. Estate plans need to be structured to provide maximum care and financial support for a special needs beneficiary, without jeopardizing the beneficiary's eligibility for government benefits. If a retirement account is payable outright to such a beneficiary, a special needs trust should be created to supplement government benefits or assistance rather than diminishing such benefits.

By having the flexibility to name a special needs trust as beneficiary of the retirement account, the beneficiary will still be able to qualify for Medicaid and other government benefits. The objective of using a trust in this case is to maintain the beneficiary's eligibility for public benefits, while at the same time preserving adequate funds to provide special items needed by the beneficiary that are not otherwise provided. This is extremely important to the beneficiary because it promotes stability for the beneficiary and avoids the disruption and anxiety, which can be caused by the discontinuance of these benefits.

Revocability. While living, the Grantor of the Trust has the right to amend or revoke the Trust agreement at any time.

Management of Assets. You as the Trustee have control over the assets. When you pass away or become incapacitated, the successor Trustees you have selected will have control. The Trustee is responsible for management, including investment decisions, safeguarding of assets, and record keeping. The Trustee’s knowledge, experience, and access to information, particularly when a professional or corporate fiduciary is used, can be very helpful in increasing both income and principal. The trust is a good tool to facilitate professional investment advice. Naming a trust as beneficiary of a retirement account allows the account owner the ability to select a trustee who is "financially wise" in order to preserve and create wealth for future generations. This helps prevent a beneficiary from making uneducated investment decisions or being influenced by others, thereby losing a major benefit of the retirement account.

Beneficial Use of Assets. You are the lifetime beneficiary of the Trust, and therefore are entitled to all the use and enjoyment of the Trust assets as long as you live.

Protection During Illness, Incompetency, or Absence and Continuity. The Trust continues to operate even though you may be unable to attend to your affairs. Upon your death or incapacity, the Trust continues to operate uninterrupted by probate proceedings, guardianships, and conservatorships. As the lifetime beneficiary of the Trust, the Trustee must administer the Trust for your benefit during your lifetime. With your IRA Dynasty Trust™, in the event that a beneficiary becomes disabled or incapacitated and cannot manage his affairs, the trustee of a trust can continue to manage the assets of the trust. Therefore, a trust would be beneficial, not only in situations where, because of sickness or injury, the beneficiary is no longer physically able to attend to his affairs, but also in the event he should become "incapacitated" or "incompetent" as defined under state law, in which case, without a trust, a guardian or conservator may have to be appointed by the local probate court to manage his property. The expenses, delays, and restrictions of a court-supervised conservatorship over one's assets could be avoided if the assets were held and managed in a trust.

Perpetuity. When the Primary Beneficiaries die, the Secondary Beneficiaries become Primary Beneficiaries, and the next generation becomes Secondary Beneficiaries. In this way, the Trust keeps moving from one generation to the next in perpetuity. If the Trust runs out of money or if there are no qualified beneficiaries, the Trust will terminate at that time. Some jurisdictions may otherwise require the Trust to terminate at some point. If that is the case, the Trustee has discretion to move the Trust to a jurisdiction that permits it to continue. The Trust, therefore, is protected from the creditors and over-reaching spouses of the Primary Beneficiaries and Secondary Beneficiaries in perpetuity.

THE RESULT

LIVE WELL and LEAVE A LEGACY