Although the Supreme Court ruled in 2014 that inherited IRAs are not protected from creditors, Ohio is one of the few states that has passed a law that says otherwise. However, a person who is creating an estate plan might still be concerned about passing down a retirement account to an irresponsible family member. An IRA trust can protect these assets. When the money goes into a trust, a trustee controls how and when the heir can access the funds. Retirement plans such as 401(k)s have different rules from IRAs, but an IRA trust can still be the beneficiary of these types of plans too.

Because there are expenses associated with trusts, there are two factors to consider in deciding whether this is the best choice. How much the account is worth is one. The other is the age and situation of the heir. For example, a person who inherits a large sum of money at 18 or 21 might be unprepared to handle it, or an heir may have substance abuse issues that could lead to irresponsible spending.

With a conduit IRA trust, distributions go to the trust and then the beneficiary and are taxed at whatever the beneficiary’s tax rate is. An accumulation trust does not distribute money to the beneficiary immediately, and the trust’s income tax rate applies.

Trusts may have a number of other uses. They can help an estate avoid probate and distribute assets more quickly to heirs. Avoiding probate means the estate plan stays private. Trust might help reduce taxes, manage money for a relative with special needs or give to charity. An attorney may be able to review the uses of trusts based on a client’s particular situation and advise regarding how they might fit the client’s estate planning intentions.

More Recent News

Elder Law

Common Medicaid Pitfalls and How to Avoid Them

close up of woman signing a document to designate beneficiary

Estate Planning

Primary Beneficiary vs. Contingent Beneficiary: What’s the Difference?

legal guardian comforts child by holding hands

Estate Planning

Guardianship vs. Custody – What Are Your Legal Rights?

We are here to help.

At Solomon, Steiner & Peck, we’re dedicated to your success. Rely on our experienced attorneys to treat you with the same patience, honesty, and respect that we show our own families.

Contact Us