Strategic IRA Planning, Consider A Trust
IRAs and other retirement investments are subject to special rules because of their preferred status in the IRS's rules on qualified investments. Estate planning with IRAs requires specialized knowledge to be able to leverage the IRS's rules for maximum benefit for your family.
Here is an excellent article with illustrations for how to create more wealth for your family by strategic IRA planning with IRA inheritance trusts. His article starts with the following:
[I]f a child or grandchild inherits an IRA, they will be tempted to close it out and withdraw all the money. In addition to having to pay income tax on all the withdrawal, there will be no continued opportunity for further tax deferred growth. If, on the other hand, a 25-year-old child inherits a modest, say $100,000 IRA, and if the IRA is left in place to pay only the required minimum distributions over the child's lifetime, it will pay the child far in excess of $1 million.
Consequently, the benefits of planning ahead with your IRA assets are plentiful. Appropriate planning can protect the benefits of the IRA and protect the assets of the IRA for your heirs. Read the article above and you will see illustrations of the power of an IRA inheritance trust.
Unfortunately, I have had occasion where IRAs were just left to children and grandchildren without consideration for the tax consequences of the planning. This most often happens when estate plans are created by do-it-yourselfers, document preparers, and attorneys that do not focus on estate planning.
