You have consistently set aside a small portion of your paycheck for retirement your entire adult life. Between the benefits of company matching contributions, tax-deferred growth, and in some cases tax-FREE growth, saving for retirement is a no-brainer!
However, those tax benefits also have strict requirements. Required Minimum Distributions must be made in the appropriate amount – and time – based on the account owner’s age and the value of the account. If distributions are taken too early, the amount distributed will be taxed as income and there will also be a 10% early withdrawal penalty. If the RMDs are not taken in the full amount required by the deadline, a 50% penalty will be levied in the amount of the required distribution.
You probably understand how the distributions work if it is your own account, but what happens if your minor child(ren) inherits your IRA? Can your spouse inherit your IRA and then name someone beside your children as the beneficiary/ies? How can you ensure the retirement funds are available to help your children through a financial emergency without allowing them to cash it out to buy a house boat?
IRA Trusts allow your desired beneficiaries to ultimately receive the funds in your retirement accounts, but only within the IRS guidelines and under the circumstances you dictate. If your qualified retirement accounts total $200,000 or more, be sure to ask us whether an IRA Trust is a good fit for your family!
IRA Trust benefits
– allows more principal to remain intact due to smaller RMDs
– compound interest accelerates the growth of principal
– protects minors and people with drug, alcohol, or gambling addictions
– protects the inherited retirement account from creditor claims
– ensures compliance with IRS regulations
– allows distributions tailored to each beneficiary’s age and financial situation
1 trust – $1,500 (typically single individual)
2 trusts – $2,250 (typically married couple)