UPCOMING EVENTS

SEMINARS FOR SEPTEMBER 2017

MONROEVILLE
Tuesday, September 12, 2017
2:00PM
The Estate Planning Centers
3824 Northern Pike, Suite 801B
One Monroeville Center
Monroeville, PA 15146
Just west of Red Lobster on Rt. 22

MURRYSVLLE / DELMONT
Tuesday, September 12, 2017
7:00 PM
Holiday Inn Express
Delmont/Murrysville
6552 Route 22
Delmont, PA 15626
Behind Lamplighter Restaurant on Rt. 22

MURRYSVLLE / DELMONT
Thursday, September 14, 2017
2:00 PM
Holiday Inn Express
Delmont/Murrysville
6552 Route 22
Delmont, PA 15626
Behind Lamplighter Restaurant on Rt. 22

MONROEVILLE
Thursday, September 14, 2017
7:00 PM
The Estate Planning Centers
3824 Northern Pike, Suite 801B
One Monroeville Center
Monroeville, PA 15146
Just west of Red Lobster on Rt. 22

MONROEVILLE
Saturday, September 16, 2017
9:30 AM
The Estate Planning Centers
3824 Northern Pike, Suite 801B
One Monroeville Center
Monroeville, PA 15146
Just west of Red Lobster on Rt. 22

 
 

 
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Inherited IRA/401k Trusts:

Making A Sweet Deal Even Sweeter For Your Family
 
We all know about the benefit of investing in tax-deferred retirement savings plans, i.e. tax deferred growth during our lifetime, with required withdrawals starting later in life (currently, 70 ½). These investment vehicles, such as IRA’s, 401k’s and others were created to help you save for your own retirement, not to help you transfer benefits to your children at the expense of the government. With careful planning, however, the basic IRA or 401k can be stretched to achieve significant tax savings for your family for decades after your death, and yet enjoy far greater protection than your current beneficiary designation likely provides for.  The key to this planning is the use of a well designed Retirement Plan Trust. 
 
The Basics: Getting the Stretch Treatment
 
The first key to maximizing an IRA or 401k is to establish your beneficiary designations in a way which permit your beneficiary to stretch the tax deferral of the account balance after your death. I often see a very basic mistake of people with no beneficiary, or their estate as a beneficiary, or a beneficiary who is aged or very ill.  Under these circumstances, your IRA can lose its tax deferred status upon your death, requiring your family to withdraw the IRA balance, declare it as income, and pay taxes on the balance at current income tax rates for ordinary income (i.e. their highest possible tax rate, including counting your account balance as income).  This problem can be avoided through careful selection of your beneficiaries in a way which will permit a living beneficiary to instead convert the account to an Inherited IRA, obtain continued tax deferral, and only trigger small required withdrawals to be made each year over their life expectancy. 
 
Present Peril: Dangers Overlooked by Most Families
 
While naming healthy beneficiaries can extend the tax treatment of the account, (which is an admirable goal), it fails to address a number of other problems, such as:
Problem 1: An Inherited IRA/401k can become one of your family’s most exposed assets to current and potential creditors (defaulted loans, credit card debt, lawsuits, etc).
Problem 2: Your beneficiary may take the money out too quickly, losing the benefit of tax deferral, and at the same time triggering current tax liabilities at increasing tax rates.
Problem 3: Your beneficiary may improperly handle the account following your death (it is their responsibility, not the financial institution’s), creating a current income tax on the entire balance even if it isn’t withdrawn, and a loss of decades of tax-deferred growth.
Problem 4: Your beneficiary may not have the skills to properly manage the investments in the account, resulting in lost opportunities, or substantial losses.
Problem 5: If your beneficiary isn’t equipped with good budgeting skills, these accounts may be seen as a “windfall”, and quickly spent on items which don’t provide lasting value or security for them.
Problem 6: If your beneficiary is now, or later, entitled to governmental benefits due to disability or economic conditions (Medicaid or S.S.I. programs, for example), a typical Inherited IRA/401k will disqualify them, terminating these critical benefits.
Problem 7: Your beneficiary’s family may face substantial federal Estate Taxes upon the death of your beneficiary, further eating away at the account value.
 
Modern Marvels: Opportunities Overlooked by Most Families
 
These problems and many others can be avoided by including a properly designed Retirement Plan Trust in your planning scheme.  With a good Retirement Plan Trust in place, you can:
Give your surviving spouse, if any, the maximum benefits an IRA/401k permits;
Permit your beneficiaries to stretch out the tax deferred growth over their entire life expectancy
Delay payment of income taxes until distributions from the account are taken
Insulate the account from being taken away by creditors or predators
Provide methods to assure that withdrawals from the account are taken at the right time, for the right reasons, and in the right manner.
Shelter the account from being considered a disqualifying asset for the purpose of governmental aid programs
Incorporate responsible oversight and management
Eliminate federal Estate Tax on the account upon your beneficiary’s death
Establish who you want to take over the benefit of the assets after the death of your closest beneficiaries, often to make sure the money stays in the family;
 
…And more. One important caution: a typical Revocable Living Trust can destroy all of the above advantages if it is named as a beneficiary. This estate planning tool can be properly incorporated into a Revocable Living Trust (which we do for most of our clients), added to an existing trust, or be created as a separate stand-alone trust. Do not, however, blindly assume that because you got a trust somewhere, it is fine to include it as your beneficiary.
 
Who should consider a Retirement Plan Trust
 
For anyone with an IRA or 401k, situations which warrant the examination of whether or not inclusion of a Retirement Plan Trust makes sense include:
You have a large IRA or 401k
You want your beneficiaries to be protected against creditors, predators or estate taxes
You have children or grandchildren who are minors
You have children or grandchildren who are not fully money-savvy
You want your savings to provide the maximum financial benefit to your beneficiaries during their entire lifetime
You have a Special Needs individual in the family
You have old, outdated beneficiary designations from years ago; or
You just don’t understand the details of how IRA’s or 401k’s work, and you want to learn more.
 
Taking the Next Step
 
For most people, the easiest way to learn more about these powerful planning tools is to stop in so that we can talk about your unique situation. Every family is different, and there is no magic solution that is right or best for everyone. 
 
Call now for a complimentary appointment to discuss how this strategy, and a wide assortment of other contemporary estate planning techniques, tools and strategies can be woven into a custom plan, crafted to achieve your goals.