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Pet Trusts & IRA Trusts

What Is a Pet Trust When Compared to a Family Trust?

A pet trust is a special kind of trust that is either a separate trust or a provision in an existing will or trust. The pet owner creates this trust for the benefit of his beloved family pets.

Pets are very important to people. Many people treat their pets like members of the family, like children. Unfortunately, under the law of every state in the country, a pet is considered property.

As such, you cannot leave your pet’s money or assets, although this hasn’t stopped many people from trying. Legally, it’s not feasible.

If something happens to a pet owner, the question is ultimately this: how do you nominate someone to look after the pets?

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Do Pet Trusts Create an Essential Method of Caring for Pets After the Owner Passes Away?

Ultimately, pets are not able to speak. Every year, thousands of pets are simply put to sleep because their owners are either disabled or dead without provisions in their will or their trust.

If the owner dies without specifically carving out details for his animals, the animals will be taken to the shelter and euthanized.

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What Are the Common Misconceptions About Pet Trusts That Have to Be Dispelled?

The big question involves the concept of both a trustee and a caregiver. People will ask, “Do we really need two people involved? Does there have to be a trustee that handles the money along with somebody who takes care of the dog?”

The answer is yes. The dog cannot speak for itself; the cat cannot hire a lawyer to enforce its rights. If you don’t have somebody as an overseer, looking over the shoulder of the caregiver, then the caregiver has the opportunity to take advantage.

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What Is an IRA Trust?

An IRA is Individual Retirement Account trust. Although we use the term “IRA” for this, the term can further be utilized for any type of qualified retirement plan, like a 401K or a SEP-IRA, etc.

Essentially, when you contribute to a plan like this, you’re putting money into the account trusts before taxes. Afterwards, you’re claiming the tax deduction on your income taxes.

This money grows. Whichever investment you’ve chosen is then tax-free. At a certain point, when you remove the money, you need to pay the taxes. When you remove the money, that money is then considered your income.

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What is the Asset Protection Aspect of an IRA Trust?

In a recent case, a person died and named beneficiaries for his IRA. In the old days, an inherited IRA was protected from the creditors of the beneficiary.

However, in this case, (Clark v. Rameker) the Supreme Court said, “No asset protection exists for an inherited IRA anymore.” Thusly, IRA trusts are very beneficial since they do provide asset protection for your beneficiaries.

Bottom line, after the recent Supreme Court ruling, the inherited IRA is not safe unless you name an IRA Trust as the designated beneficiary.

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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.

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