Naming a trust as the designated beneficiary of a client’s IRA has several very important advantages over directly naming the beneficiaries. First, the beneficiary may be a minor, not prudent with money, have marital or creditor issues, or may be disabled. Second, if the beneficiary dies before distribution, the contingent beneficiaries may not be correct. Third, the beneficiary may intentionally or unintentionally withdraw the IRA. However, naming the client’s revocable living trust as the beneficiary, even with the appropriate “conduit-trust” language, may create issues with the operative age for the “stretch-out” of the required minimum distributions. In 2005, the IRS issued Private Letter Ruling 200537044 (the “PLR”) that approved a new type of revocable trust created solely to be the beneficiary of an IRA account. As a result of this PLR, it is now possible for your clients to create a stand-alone trust which provides maximum protection and flexibility.
This IRA Beneficiary Trust® insures that your client’s beneficiaries (those who will receive the IRA’s after the client’s death) “stretch-out” their taxable, required minimum IRA distributions over a much longer period of time; with this trust, the age of each beneficiary becomes the operative age for that beneficiary’s required minimum distribution. And, if they do it right, the IRAs can continue to compound for many years income-tax free – – and may literally grow to be worth millions of dollars! This type of trust is also called an IRA trust, a standalone IRA trust, an IRA stretch trust or an IRA protection trust.
If children and grandchildren who inherit IRA funds keep the funds in the IRA for their lifetime and only take the required minimum distributions each year (the “stretch-out”), the amount of wealth that can be retained in the family is very significant. For example, with a $100,000 IRA account and an annualized 8% return: for a 35 year old beneficiary, the total benefit is $1,228,630 and for a 10 year old beneficiary, the total benefit is $5,363,512!
This benefit is obtained only if the beneficiary retains the inherited funds inside the IRA account; if the child (for example) is named as the beneficiary and terminates the IRA account, the benefit is lost. The IRA Beneficiary Trust® can insure the stretch-out and can provide the maximum benefit. Even without the normal thought process of a younger beneficiary of “getting everything now”, a beneficiary may not be aware of the tax rules or of the distribution choices, and may allow the IRA to be terminated.
Further, even if the beneficiary retains the IRA account, the account may be reached by creditors or be required to be “spent-down” for governmental entitlements. One of the big advantages to the IRA Beneficiary Trust® is the option to give a “Trust Protector” the right to elect out of a straight “conduit-trust” (i.e., where the MRD must be paid to the beneficiary on an annual basis) to a fully discretionary “accumulation trust” (i.e., where the trustee can hold the beneficiary’s MRD inside the trust). This election must be made, if at all, by September 30 of the year following the client’s death. Making this election may result in a shorter “stretch-out” because the age of the oldest “possible beneficiary” must be used (the Trust Protector is also given the power to limit such possible beneficiaries to minimize this issue); however, having this option to elect between the different forms of trusts provides the flexibility to consider all factors known at the time of death and up to the election deadline (e.g., creditor problems, disability, etc.) which may greatly out-weigh the potential increase in the income tax costs.
WHEN WILL THE TRUST ADMINISTRATION MODULE BE AVAILABLE?admin2019-09-14T15:28:16+00:00
Our Trust Administration Template Set is still under construction; it will hopefully be available Soon. For now we do have the Trusts & Wills and the Irrevocable Trusts template sets. For full product descriptions, please go to Products. The best way to see the power of the software and its ease of use is to download our free evaluation trial of the Trusts & Wills template set.
CAN I HAVE A TRIAL OF THE IRREVOCABLE TRUSTS TEMPLATE SET?admin2019-09-14T15:31:49+00:00
If you have not yet done so, please go to our product page for a full description of the Irrevocable Trusts template set and the pricing. The best way to see the power of the software and the ease of use is to download the free evaluation trial. Only the Trusts & Wills template set is available in the trial format; however, the Irrevocable Trust template set does come with a thirty day money back guarantee.
I HAVE A MAC, WILL YOUR SOFTWARE WORK ON IT?admin2019-09-14T15:29:40+00:00
Our template set does not work with the Mac OS (actually, it is the underlying assembly software from HotDocs which requires a Windows OS). However, if you have a dual-core Mac which supports both the Mac OS and Windows, the program will run in the Windows VM with no problems.
CAN I LOAD THE SOFTWARE ON MORE THAN ONE COMPUTER?admin2019-09-14T15:29:54+00:00
Our license is more realistic than most. The license is for one primary user on as many computers as he/she uses (i.e., office desktop, office server, laptop, home desktop) and for one assistant. The annual update subscription (after the first year) is the same. The User’s Guide has extensive information on creating a network set-up or for configuring multiple computers.
Our software is delivered strictly by download; we update so frequently that a CD would be obsolete almost by the time you received it (additionally, we would have to add shipping and sales tax to our cost). There is no problem with a computer crash or if you buy a new computer, with our User Account Center you can install or re-install the software 24/7.
HOW OFTEN DO YOU UPDATE?admin2019-09-14T15:30:19+00:00
We update constantly (as we add new templates, options, law changes, etc.). All current subscribers have a subscription page at our User Account Center which permits the installation, re-installation and update of the software 24/7. We also send emails to all users after any major revision (e.g., after a law change). The annual (after the first year) update subscription is $250 for the Trusts & Wills template set and $150 for the Irrevocable Trusts set. This subscription is voluntary on your part since the software will continue to run whether you subscribe or not (as compared to our competition whose software will “lock-up” after each year unless you re-purchase it). Most, but not all, of our users do subscribe; but it is not mandatory for the software to continue to function (obviously, any changes to the template, either for law changes or revisions, are the responsibility of the user if the user does not subscribe).
ARE THE DOCUMENTS “HIPAA” COMPLIANT?admin2019-09-14T15:35:18+00:00
All documents included in the program which may be needed for health care purposes are specifically HIPAA compliant and the HIPAA release provisions are made effective immediately. For more information on HIPAA, please click here.
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