While you are alive the money in your retirement account enjoys a special status. We call that status asset protection. This means the money is immune from lawsuits and creditor claims which may or may not be fair. The great thing about your retirement accounts is that you can pass any unspent money to your loved ones, great idea. However, as soon as you do the money loses that special status called asset protection. What does that mean? One lawsuit against your child, a divorce, car crash, your child the doctor being sued for an unfair malpractice claim, all the sudden the loved one’s inheritance: GONE!
There’s a great answer for this. It’s a special trust that is specifically designed to receive retirement account assets. This special trust is designed to protect inherited assets from the creditors of your beneficiary. I