Standalone Retirement Trusts

It’s shocking to most people, but your retirement accounts can be seized once they pass to your loved ones. During your lifetime, your retirement funds have asset protection, meaning they can’t be taken in a lawsuit. Unfortunately, as soon as retirement accounts are inherited, the protection evaporates. This means your hard earned money can legally be snatched by strangers, creditors and the courts.

What is a Standalone Retirement Trust?

A Standalone Retirement Trust (SRT) is a special type of revocable trust.

The SRT is popular because it:

  • Protects inherited retirement accounts from beneficiaries’ creditors as well as predators and lawsuits
  • Ensures retirement accounts go to whom you designate – and nobody else
  • Allows for experienced management and oversight of assets by a professional trustee
  • Prevents beneficiaries from reckless spending or gambling
  • Enables proper planning for a special needs beneficiary
  • Permits you to name minor beneficiaries as immediate beneficiaries without court-supervised guardianship
  • Facilitates generation-skipping transfer tax planning

Divorce Creditor – A Common Example

Many parents are concerned that their in-laws may someday become the outlaws; they may someday get divorced and inherited assets can be seized by a divorcing spouse.

Here’s the story of Mary and Tom – which outcome would you prefer for your children?

Option 1: Mary and Tom love their son-in-law, Mike, and think his marriage to their daughter Liz will last. They gave Liz her share of their retirement plans outright at their deaths. Five years later, Liz and Mike divorced and Mike was able to take 50% of Liz’s inherited retirement funds.

Option 2: Mary and Tom love their son-in-law, Mike, but recognize that 50% of all couples end up in divorce. It’s an unfortunate reality, so when they did their estate planning, they provided for their children, but made sure the inheritances couldn’t be taken from them. Instead of outright distributions, they passed their retirement plans in trust. Five years later, Liz and Mike divorced and Mike was not able to take any of Liz’s inheritance.

Want to know more? Contact us today to schedule a conversation. While every situation is different, we can help you determine if an SRT is right for you.