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Category Archives for IRA Trust

Escape From a Bad Trust: 5 Strong Reasons to Decant Your Trust

When a bottle of wine is decanted, it’s poured from one container into another. When a trust is decanted, trust assets are poured from an old trust into a new trust with more favorable terms.

Why Should a Trust Be Decanted?

Trusts are decanted to escape from a bad trust and provide beneficiaries with more favorable trust provisions and benefits.

Here are 5 strong reasons to decant your trust:

1. To clarify ambiguities or drafting errors in the trust agreement. As trust beneficiaries die and younger generations become the new heirs, vague provisions or mistakes in the original trust agreement may become apparent. Decanting can be used to correct these problems.

2. To provide for a special needs beneficiary. A trust that is not tailored to provide for a special needs beneficiary will cause the beneficiary to lose government benefits. Decanting can be used to turn a support trust into a supplemental needs trust, thereby supplementing, but not supplanting, what government benefits cover.

3. To protect trust assets from the beneficiary’s creditors. A trust that is not designed to protect the trust assets from being snatched by beneficiary’s creditors can be rapidly depleted if the beneficiary is sued, gets divorced, goes bankrupt, succumbs to business failure, or suffers a health crisis. Decanting can be used to convert a support trust into a full discretionary trust that beneficiary’s creditors will not be able to reach.

4. To merge similar trusts into a single trust or create separate trusts from a single trust. An individual may be the beneficiary of multiple trusts with similar terms. Decanting can be used to combine trusts into one trust thereby reducing administrative costs and oversight responsibilities. And, on the other hand, a single trust that has multiple beneficiaries with differing needs can be decanted into separate trusts tailored to each individual beneficiary.

5. To change the governing law or situs to a different state. Changes in state and federal laws can adversely affect the administration and taxation of a multi-generational trust. Decanting can be used to take a trust, governed by laws that have become unfavorable, and convert it into a trust that is governed by different and more advantageous laws.

You’re Not Stuck With Your Trust: We’ll Help You Escape

We include trust decanting provisions in the trusts we create. Including trust decanting provisions in an irrevocable trust agreement or a revocable trust agreement that will become irrevocable at some time in the future is critical to the success and longevity of the trust. Such provisions will help to ensure that the trust agreement has the flexibility necessary to avoid court intervention to fix a trust that no longer makes practical or economic sense.

You and your loved ones don’t need to muddle through with outdated and inappropriate trust provisions. If you are interested in adding trust decanting provisions to your trust or would like to have the decanting provisions of your trust reviewed, please call our office at 480-776-6055.

5 Reasons to Protect Your Retirement Accounts Now

5 Reasons to Protect Your Retirement Accounts Now

During your lifetime, your retirement account has asset protection, but as soon as you pass that account to a loved one, that protection evaporates. This means one lawsuit and POOF! Your life long, hard earned savings could be gone.

Fortunately, there is an answer.  A special trust called a “Standalone Retirement Trust” (SRT) can protect inherited assets from your beneficiaries’ creditors.  We’ll show you what we mean.

When your spouse, child, or other loved one inherits your retirement account, their creditors have the power to seize it and take it as their own.

If you’re like most people, you’re thinking of protecting your retirement account?  Here are 5 reasons we think you’re right.

  1. You have substantial combined retirement plans. Spouses can use an SRT to shield one or the other from creditors.
  1. You believe your beneficiary may be “less than frugal” with the funds. Anyone concerned about how their beneficiary will spend the inheritance should absolutely consider an SRT as you can provide oversight and instruction on how much they receive – and when.
  1. You are concerned about lawsuits, divorce, or other possible legal actions. If your beneficiary is part of a lawsuit, is about to divorce, file for bankruptcy, or is involved in any type of legal action, an SRT can protect the assets they inherit from those creditors.
  1. You have beneficiaries who receive assistance. If one of your beneficiaries receives, or may qualify for, a need-based governmental assistance program, it’s important to know that inheriting from an IRA may cause them to lose those benefits. An SRT can avoid disqualification.
  1. You are remarried with children from a previous marriage. If you are remarried and have children from a previous marriage, your spouse could intentionally (or even unintentionally) disinherit your children.  You can avoid this by naming the spouse as a lifetime beneficiary of the trust and then having assets pass onto your children after his or her death.

You’ve Worked Hard To Protect & Grow Your Wealth – Let’s Keep It That Way

You worked hard to save the money in those retirement accounts and your beneficiaries’ creditors shouldn’t be able take it from them. Let us show you how an SRT can help you protect your assets as well as provide tax deferred growth. NOW is the best time.

Warning: Don’t Let Creditors Inherit from You

Shocking to most people, the retirement account you leave for your spouse can be seized in a divorce, lawsuit, or bankruptcy.

3 Options Available To Surviving Spouses

When your surviving spouse inherits your IRA, he or she generally has three options:

  1. Cash out the inherited IRA and pay the associated income tax.

WARNING: the cashed-out IRA will not have creditor protection and accelerates taxation.

  1. Maintain the IRA as an inherited IRA.

WARNING: the cashed-out IRA will not have creditor protection.

  1. Roll over the inherited IRA and treat it as his or her own.

WARNING: the cashed-out IRA will not have creditor protection.

It’s frustrating to many that a stranger can swoop in and take their hard earned money; fortunately, there’s a solution and that solution is a retirement trust.

Standalone Retirement Trusts Provide Protection

A Standalone Retirement Trust (SRT) is a special type of revocable trust designed to be the beneficiary of your retirement accounts after you die. It can protect your assets from creditors.  In fact, we can include trust provisions which specifically benefit your spouse in situations such as:

  • Second marriages
  • Divorce
  • Lawsuits from car accidents, malpractice, or tenants
  • Business failure
  • Bankruptcy
  • Medicaid qualification

Want To Know More? 

The bottom line is that a properly drafted SRT is often your best option for protecting your retirement assets (and providing the bonus of tax deferred growth). Want to know more?  Contact us at 480-776-6055 today to schedule a conversation. We look forward to working with you.

Financial Smarts Peak at 50, Here’s How to Protect Your Older Self

There's no substitute for proper planning.

There’s no substitute for proper planning.

A recent study conducted by Texas Tech University concluded that the ability to make smart financial decisions peaks at age 50.  This decline was observed in both men and women, making both sexes equally vulnerable to financial fraud as they age.

4 Tips for Protecting Your Finances From Scams, Shams and Schemes as You Age

In “4 Ways to Protect Your Retirement Money From Scammers (and Your Future Self)” (Time.com), Liz Weston points out that fraud victims age 65 and older lost an average of $30,000, and one in ten lost more than $100,000.

Now that I have your attention, here are the four tips that Ms. Weston offers for protecting your finances as you age or those of you with an elderly parent or other relative:

  1. Make Investing Simpler. This tip emphasizes consolidation of similar accounts (such as combining multiple IRA accounts into a single account), replacing individual stocks and bonds with mutual funds or exchanged-traded funds (in general funds will require less attention), and keep two credit cards (one for everyday use and the other for automatic bill payments).
  1. Assemble Defenders. This tip emphasizes choosing the right person – someone who is money-savvy, trustworthy, and ready to act in your best interest – to step in and manage your finances when you are not able. This is accomplished through naming an agent to act on your behalf in financial matters in a legal document called a Power of Attorney.  While your spouse may be your first choice as agent, be sure to choose a younger alternate in case your spouse also becomes impaired.
  1. Open Up Your Finances. This tip emphasizes sharing your financial information with your agent so that he or she will be able to notice when things go awry. For example, you can set up email or text alerts with your financial institutions that notify both you and your agent when unusually large transactions take place. You should also give your doctor and financial advisor permission to contact your agent if they become concerned about your cognitive abilities.
  1. Design a Money Blueprint. This tip emphasizes putting together an “investment policy statement” (IPS) which spells out your financial goals over time, what types of investments you will hold, and how much of your portfolio should be allocated to safe and riskier assets. An IPS will not only help you keep your investments on track, but it will also help you resist sales pitches that fall outside of your plan.

Of course, a comprehensive estate plan is the ultimate way to protect you, your family and your finances as you age. Contact us today if you are interested in learning more about estate planning or if you have an estate plan that has not been updated in the past few years.

Early Predictions About 2016 Estate Tax, Gift Tax, GST Tax and Annual Gift Tax Limits

Under current law the federal estate tax, gift tax, and generation-skipping transfer tax exemptions have become unified and are indexed for inflation on an annual basis.  Since 2011, the exemption and tax rate have changed as follows:

Year    Exemption       Tax Rate

2011    $5,000,000      35%

2012    $5,120,000      35%

2013    $5,250,000      40%

2014    $5,340,000      40%

2015    $5,430,000      40%

The annual exclusion from gift taxes is also indexed for inflation on an annual basis but only in $1,000 increments.  Since 2011, the annual gift tax exclusion has changed as follows:

Year    Exclusion

2011    $13,000

2012    $13,000

2013    $14,000

2014    $14,000

2015    $14,000

While the IRS will not officially release the 2016 inflation-indexed exemption and exclusion until later in October, Wolters Kluwer Tax & Accounting has released its 2016 predictions based on historical inflationary trends.  According to Wolters, the exemption should end up at $5,450,000 in 2016, or $10,900,000 for married couples.  While this is a mere $20,000 per individual / $40,000 per married couple increase over the 2015 exemption, it is a whopping $450,000 per individual / $900,000 per married couple increase since 2011. Unfortunately, Wolters anticipates that the annual gift exclusion will remain at $14,000 for 2016.

Wealthy individuals and couples should continue to monitor these inflation-indexed numbers and plan accordingly. We will update you on the official 2016 numbers once they are released by the IRS.