For many, trusts are one of the most effective estate planning tools available. So much so, that it is common to see owners of Individual Retirement Accounts (IRA) designate a trust as the beneficiary in order to gain more control over how their assets will be distributed post mortem. While the benefits of doing so are undeniable, elder law attorney Shawn Weera recently revealed that there are still several steps that must be taken in order to ensure that the outcome achieved is consistent with the IRA owner’s wants and needs.
Almost anyone or anything can be made the beneficiary of an IRA, explained Weera. However, if it is a non-person, all of the account owner’s assets must be allocated within five years, and they are provided little control over how it is done. A trust would generally fall under this category, but if it is valid under state law an exception applies, and the oldest underlying beneficiary of the trust will determine the distribution options. Individuals often choose this method when they would like to schedule asset disbursement as opposed to lump-sum payments, allocate funds for specific purposes, such as financing education or housing, or provide for children from a previous marriage. For many Americans, they simply wish to gain more control over the disposition of their estate. Any conditions the IRA owner would like to be met can be established in a trust, which would then be made the responsibility of the trustee to comply with.
Shawn Weera went on to discuss a few measures that must be followed to ensure that designating a trust as the beneficiary of an IRA is the solution that it is meant to be. To begin with, the account owner should confirm that all provisions are acceptable to the IRA custodian and that they meet regulatory requirements. When designing any trust, an elder law attorney or other estate planning professional should be consulted for assistance with the language and the various complex process that must be carried out. When all parties involved have a clear interpretation of the provisions and an understanding of the applicable laws, it is much easier to guarantee that the IRA owner’s estate planning needs are met and maximized.
Shawn Weera, JD, MFP, is a nationally recognized asset protection expert and the President of the Law Offices of Shawn Weera. As a licensed elder law attorney, he has been helping retirees preserve their assets through wise and efficient planning for over 15 years. Weera currently provides long-term strategic solutions in the areas of estate, Medicaid, and veteran benefits planning. He is a member in good standing of the State Bar of Michigan, the Grand Rapids Bar Association, and the National Association of Elder Law Attorneys. Several times each month, he holds free seminars in the Grand Rapids area, where he educates attendees about a wide range of issues affecting Michigan retirees.