Special Asset Trusts

IRA Stretch Trust

You might ask yourself why it is important to plan to protect the IRA at all.  If your beneficiaries can achieve lifetime  stretch distributions simply by you appropriately naming them as Designated Beneficiaries, what does an IRA Stretch and Protection Trust add?

The problem with simply naming beneficiaries is that you have done nothing to ensure the stretch distributions.  The beneficiary may be able to take STRETCH distributions, but that result is not required.  The IRA is still subject to the following risks:

  • Creditor Claims
  • Bankruptcy
  • Divorce
  • The Beneficiary’s Desire to have the Money NOW!

The most significant risk is the beneficiary, who is likely to either get a divorce or simply decide that tax deferral is not that important and cash out the IRA.

Typical estate planning trusts are good at what they do, but they are a general purpose trust.  If they are not drafted to allow or require the beneficiaries to stretch distributions then they may not accomplish your specific goals.

Life Insurance Trust

Many people have life insurance in large amounts to protect their families in the event of their death. While the death benefit of life insurance is free of income tax to the beneficiary, it is not free of Estate Tax in the policy owner’s Estate. If your taxable estate, including the death benefit of life insurance on your life and owned by you, is large enough to result in an Estate Tax then a Life Insurance Trust can help you avoid the Estate Tax on your life insurance and deliver the full benefit of the policy to your family.