How to Use a Standalone Retirement Trust (SRT) to Protect Your Assets From Creditors
Protecting assets from creditors is a priority during your life and after your death. Using trusts is one of the most common ways to accomplish both of these goals. A Standalone Retirement Trust might be a good option for your estate planning needs. Our Maryland estate planning attorney can help you choose the trust that offers the highest level of asset protection.
What is a Standalone Retirement Trust?
Most retirement funds are protected from creditors during your lifetime as long as the funds remain in a qualified retirement account. However, what happens to inherited retirement accounts? Unfortunately, these accounts do not have protection from creditors once the accounts pass to your beneficiaries or heirs.
A Standalone Retirement Trust or SRT is just one of the many types of trusts available for estate planning. This type of trust can protect inherited retirement accounts from creditors after your death. However, there are also many more reasons to use an SRT to transfer retirement accounts.
Benefits of a Standalone Retirement Trust
It takes a lifetime to build your retirement accounts. Many people intend to use these funds during their retirement years. However, some people invest in retirement accounts for inheritance purposes. Tragically, some individuals may die before reaching retirement age.
An STR can provide a solution in both cases. Inherited retirement accounts can cause several issues. In addition to losing protection from creditors, inherited retirement accounts can create tax liabilities for the beneficiaries. Furthermore, instead of giving a beneficiary a head-start on a financially stable life, inheriting a large sum of money could result in frivolous spending.
Fortunately, an SRT can address those issues and numerous other potential problems of an inherited retirement account. Advantages of a Standalone Retirement Trust include:
● Prevent retirement funds from being seized by creditors or judgment holders
● Permit a professional trustee to manage and invest the funds for maximum growth
● Protect the funds from being transferred to or accessed by spouses or ex-spouses
● Allow for benefits planning for a beneficiary with special needs so that the beneficiary does not lose needs-based government benefits
● Allows for naming minor children as beneficiaries without the necessity of a court-appointed guardian
● Allows for generation-skipping transfer tax planning to eliminate or minimize tax liability for future generations
● Prevents beneficiaries from squandering inheritances on extravagant purchases and lavish lifestyles
An SRT is not funded until your death. The trust is the beneficiary of your retirement account. Therefore, once you pass away, the retirement account is paid to the trust. The funds are used and disbursed according to the terms you set when you create the trust.
There are many reasons you might want to consider a Standalone Retirement Trust. However, before creating any trust, it is best to seek legal advice to ensure that the trust you choose is the best for your financial situation and goals.
Contact Our Maryland Estate Planning Attorney for More Information
The use of various trusts, including Standalone Retirement Trusts, as part of a comprehensive estate plan, can increase asset protection and reduce estate taxes. Our Maryland estate planning attorney works with you to identify your goals and develop an estate plan that accomplishes your wishes. Call Steve today to schedule a time to discuss your estate planning needs.
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