IRA Trusts

As a Folsom lawyer who specializes in estate planning, I have found that one of the most important assets that clients have is their retirement accounts. They have worked their entire lives to save up significant sums for the benefit of themselves and their families. Understandably, they want to ensure that these funds are protected and maximized for their family. 

An Individual Retirement Account (IRA) trust in California, like in other states, is a legal arrangement that allows you to place your IRA assets into a trust for the benefit of your chosen beneficiaries. This trust structure can provide several advantages, such as control over how your IRA assets are distributed after your passing, asset protection, and potentially more efficient estate planning.

Here are some key points to understand about an IRA trust in California:

1. Trust Creation: To create an IRA trust in California, you need to work with an attorney experienced in estate planning and tax law. For instance, Thapar Law can help you draft a trust document that aligns with your goals and complies with both state and federal laws governing IRAs. While do-it-yourself wills are sometimes possible (although not advisable), a do-it-yourself trust is very rarely possible given the complexities surrounding trust creation and administration. 
2. IRA Ownership: The trust itself becomes the owner of the IRA, and you, as the grantor, will typically act as the trustee during your lifetime, maintaining control over investment decisions and distributions. Upon your death, the trust’s successor trustee takes over.
3. Beneficiaries: You designate beneficiaries in the trust document who will receive the IRA assets upon your passing. This allows you to specify how the assets should be distributed and under what conditions.
4. Control and Flexibility: With an IRA trust, you can exercise more control over the timing and amount of distributions to beneficiaries. You can also include provisions to protect assets from creditors, divorce, and other potential risks that your beneficiaries may face.
5. Required Minimum Distributions (RMDs): If you are older than the age at which RMDs are required (currently 72, but it may change), you will still need to take RMDs from the IRA held in trust. The RMDs are based on the age of the oldest trust beneficiary.
6. Tax Considerations: IRAs have specific tax rules, and how taxes are applied to distributions from an IRA trust can be complex. Furthermore, estate taxation, which is a tax due on an individual’s entire estate upon their passing, is an additional consideration. Consulting with a tax professional, in addition to an estate planning attorney, will ensure you understand the tax implications of your specific trust structure.
7. State Laws: Be aware that state laws regarding trusts, estates, and taxes can vary. As such, if you move to different states while still having the same trust and retirement assets, there may be varying laws to take into account. 
8. Review and Update: As with any estate planning document, it’s essential to periodically review and update your IRA trust to ensure it reflects your current intentions and circumstances. Life events like births, deaths, marriages, or divorces may necessitate changes to the trust.

Conclusion

Creating an IRA trust in California can be a valuable component of your estate plan, especially if you have specific goals for the distribution of your retirement assets and want to provide for your loved ones in a structured and protected manner. Consulting with an experienced Folsom attorney who specializes in estate planning can help you navigate the complexities of creating and maintaining an IRA trust tailored to your needs. If you have any questions regarding IRA trusts, please contact Thapar Law at 916-579-0605 or send us a message.