Trusts are a common estate planning tool because of their many benefits. However, before you set up an IRA trust, you should speak with an attorney. You must take careful steps to ensure the trust is set up correctly to avoid problems after your death.
The New York & New Jersey estate planning attorneys of Merlino & Gonzalez have decades of experience assisting individuals with estate planning matters. We are committed to the individual needs of our clients, which means you receive personalized service from an attorney. Our lawyers focus on estate planning, estate and trust administration, elder law, Medicaid planning, and real estate. This focus ensures we remain up-to-date with changes in the law that could impact your estate decisions.
Contact Merlino & Gonzalez to schedule a consultation with one of our New Jersey & New York estate planning attorneys.
How Merlino & Gonzalez Can Help You with an IRA Trust in New Jersey and New York
Trust agreements do not need to be overly complex but must be drafted, executed, and funded correctly to accomplish your intended goals. Therefore, it is unwise to use trust forms found online or execute trust agreements without the guidance and advice of experienced trust attorneys.
When you hire our top-rated New York & New Jersey estate planning attorneys, you can trust we will:
- Take the time to listen to you as you tell us about your situation to ensure we understand what you desire and need from a trust
- Explain your legal options for an IRA trust, including other trusts and estate planning options that can help you accomplish your goals
- Discuss how your trust works with your estate plan
- Prepare all documents required for the trust and review the documents with you before signing
- Assist you in funding the trust
Our estate lawyers at Merlino & Gonzalez have top ratings and awards from local and national organizations, including Lawyers of Distinction. Our firm has been featured on AxcessNews, NewsBlaze, and HuffPost. We provide our clients with the legal services they need as they develop a plan to protect their legacy for future generations.
If you need help with an IRA trust or other estate matter, contact Merlino & Gonzalez to schedule a consultation with an experienced New York & New Jersey estate planning attorney.
Can You Transfer an IRA to a Trust in New Jersey or New York?
This question is somewhat misleading. You could transfer an IRA to a trust, but it would cause the entire amount in the IRA to be taxed. An IRA (Individual Retirement Account) must be owned by an “individual” and not a trust.
However, IRAs pass outside of probate to a named beneficiary. Therefore, you can name a trust as the beneficiary of your IRA. The trust is not funded during the grantor’s lifetime. The trust is established solely for the purpose of being the beneficiary of your retirement account.
Generally, an IRA trust is set up as a revocable trust. The grantor can change the trust terms during their lifetime, including changing the beneficiaries of the trust and how the trust is organized.
Why Go Through Setting Up an IRA Trust Instead of Naming a Person as the Beneficiary of an IRA?
Reasons someone may create an IRA trust instead of naming an heir as the beneficiary of the retirement account include:
- The grantor’s heir is a minor or someone with special needs and requires the trust to manage their inheritance
- An heir may have poor money management skills and could be facing bankruptcy or debt collection
- The intended beneficiary may be in a bad marriage or have a spouse who may try to control the funds
- An heir may have a substance abuse problem or other condition that might lead to risky or unhealthy situations if they receive a large sum of money
- The grantor wants to ensure the funds remain within the family by naming a successor beneficiary in case the primary beneficiary dies before the total of the funds is distributed
Your retirement account may be your most expensive asset. Therefore, your IRA is not only for your retirement but also as an inheritance for your heirs. However, if you name a person as the beneficiary of your IRA, you have no control over how the funds are used. An IRA trust gives you more control over how your heirs use the inheritance while protecting the inheritance for them.
Conduit IRA Trusts vs. Accumulation IRA Trusts
A Conduit IRA Trust requires the trustee to collect the Required Minimum Distributions (RMDs) from the retirement account. The RMDs are distributed from the trust to the beneficiary immediately. A Conduit IRA Trust ensures that the beneficiary receives the RMD each year and avoids the tax rates for trusts because the funds are not held in the trust.
An Accumulation IRA Trust also collects the RMDs yearly from the retirement account. However, the funds are held in the trust and invested for the benefit of the beneficiaries. The trust terms may instruct the trustee to make distributions from the trust for specific events or at specific intervals. However, because the funds are held in the trust, they are subject to income tax at the trust rate.
It is important to note that the RMD payout rules differ from a trust’s distribution rules. How the IRA is paid to the trust depends on the type of trust you create. The trust does not necessarily need to pay the beneficiaries each time it receives an RMD.
You want to discuss your reasons for naming a trust as the beneficiary of your IRA with your attorney. It is vital that you ensure the trust terms accomplish your goals and that the potential for higher taxes and the RMD rules do not negate the reasons for using the trust. Working with an experienced estate and trust lawyer is essential.
Learn More About IRA Trusts and Other Types of Trusts in New York & New Jersey
Our trust attorneys at Merlino & Gonzalez have extensive experience developing trusts that meet your needs and goals. Call us today to schedule an appointment with one of our New York & New Jersey estate planning attorneys. Let us help you develop a plan that protects your property and loved ones now and after your death.