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Are There Any Downsides to an IRA Trust?

Not for most families.  First, remember that if you are married, your spouse will usually be named as primary beneficiary and the IRA Trust will only be named as a contingent beneficiary.

Thusly, until that client dies, these IRA trusts are amendable. They’re revocable. Clients can change them around however they want.

After these alterations, the IRA is completely the same. It’s not changed, and the client can invest it in whatever he wants. The only alteration is the beneficiary designations.

Could This Create Asset Protection For the Person Who Sets the IRA Trust While He’s Alive or Just After His Death?

No! This will not help the owner’s asset protection. It will simply protect the beneficiaries.

What Happens If a Person Who Sets Up an IRA Trust Gets Sued and Receives Judgment While He’s Alive?

Essentially, this is tough luck. The IRA is his asset, and it’s not protected like an ERISA plan. Creditors can’t get to 401K plans, 403B plans, or ERISA plans. However, they can get to IRAs.

Sometimes, if people have a lot of money and they’re concerned about getting sued, they must consider moving that money to a 401K plan.

Is the 401k Plan Different Because it’s Protected Under ERISA?

Yes! ERISA is the federal law that governs retirement plans. Certain plans are covered under ERISA, but IRAs are not.

If a business owner has a lot of money in an IRA, the smart move might be to convert the money into a business-owned 401K plan for asset protection purposes. Know that the IRA trust will still work with the 401k plan when that person dies.

Can People Have Multiple IRAs or 401ks?

Yes. This is generally the rule. Most people have multiple IRAs and multiple 401ks.

Why Wouldn’t They Consolidate Them? Is there Any Benefit?

They should consolidate! However, most people don’t do it. They have an account at Wells Fargo, they have an IRA, and they open up a 401K through their employer.

After this, they’ll change jobs and leave their 401K where it was. It’s common to see several different accounts like that. However, I think it’s much better to consolidate your accounts into one or two.

The main benefits of the IRA trusts are that it stretches out over time and it protects the IRA. This is why the IRA trust is so important.

Is There a Minimal Amount You Suggest People Have in IRA?

I don’t think it’s really worth creating an IRA trust unless it’s worth more than $200,000 or $300,000. Alternately, you should do it if it’s the combined value of the retirement plans.

Is There Any Ceiling on How High the Amount Could Be Before You Can’t Use that Vehicle Anymore?

No! It isn’t an all-or-nothing approach, either. Sometimes, if you want to leave the IRA to a charity, you can. Furthermore, you can break it up for a number of people in your family.

For more information on Downside of IRA Trusts, a free initial consultation is your next best step. Get the information and legal answers you’re seeking by calling (949) 660-0007 today.



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