IRAs and trusts

With the volatile nature of the economy, it is understandable that some Ohioans may be concerned that their children will not enjoy the same degree of financial success that they have enjoyed. Many older people have significant assets held within retirement accounts and want to leave the proceeds to their children in order to help them after they die.

When people have retirement accounts that they want to leave to their children, they might wonder how to best pass the accounts along in a manner that preserves the greatest amounts of the balances free from taxes. Because of rule changes that happened in 2003, beneficiaries of IRAs who are not the spouses of the original owners are able to stretch out the minimum distributions from the IRAs over their lifetimes. This means that the balances can grow substantially during that time.

In order to derive the most benefits for heirs, choosing to name a trust as the beneficiary of an IRA may make sense. This can help to keep it from being passed to someone who is not the intended beneficiary. Since trusts also are not subjected to probate, the proceeds can pass outside of court and can be kept private. Using a trust as a beneficiary can also help a special needs child retain certain types of governmental assistance.

People who want to avoid probate by using trusts may want to talk to an estate planning attorney. Legal counsel can often make suggestions regarding the types of trusts that might best fit the client’s situation.