Don’t Put Your Creditors on Your List of Heirs.

This is really surprising, most people think if you leave a retirement account to your spouse is protected from creditors; it probably is not. The funds from the retirement account could be taken in a divorce, lawsuits or bankruptcy.

Three paths for surviving spouses

When you leave an IRA to your surviving spouse they generally have three things they can do:

1.     Take Cash for the IRA and Pay All the Income Tax.
WARNING: when your spouse takes cash it will just be cash taxation will be accelerated and there is no more creditor protection.
2.     Keep the IRA as an inherited IRA
WARNING: you may save the taxes but you will lose creditor protection.
3.     Rollover the inherited IRA treated as their own
WARNING: you may save the taxes but you will lose creditor protection.

This is really surprising and very difficult to deal with the believe that and take their hard earned money that they left for their spouse. Fortunately, with proper planning there is a solution: the retirement trust.

Standalone Retirement Trusts Provide Protection

There’s a special kind of trust that can be created for a single purpose. That single purpose is to receive retirement trust funds after the death of the initial retirement plan beneficiary. This special retirement trust stands on its own. This trust can protect your assets from most if not all creditors. In fact we often include special trust provisions that are specifically designed to protect your spouse and anyone else who inherits under the trust in situations such as:

  • Second Marriages
  • Divorce
  • Lawsuits from Car Accidents, Malpractice, or Tenants
  • Business Failure
  • Bankruptcy
  • Medicaid Qualification

Would You like to Learn More?
Here’s the point, if we properly create one of these trusts specifically designed to receive retirement account assets this can be your best option for protecting your retirement assets. A bonus is that it will provide tax-deferred growth. If you’d like to know more, contact us today to schedule a conversation. We look forward to working with you.

Doug Thesenvitz