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Naming a Trust as a Beneficiary of Your IRA

Beneficiary designations on IRA accounts are a great method for distributing assets upon your death. In many cases, but not all, there are benefits to naming a Trust as the beneficiary of your IRA or other tax qualified account.

• Planning for Second Marriages. Most IRA owners name their spouse as their primary beneficiary and their children as contingent beneficiaries. Upon the death of the IRA owner, the surviving spouse inherits the account and the option to update the beneficiary designations. The new owner of the inherited IRA can name anyone - a subsequent spouse, children of another marriage, friend, relative, or charity - as the new beneficiary of the inherited IRA account. By naming a Trust as the beneficiary, you can provide income for your spouse while also maintaining control over the naming of successor beneficiaries.

• Asset Protection for your Beneficiaries. An individual who inherits an IRA has the right to withdraw all the assets in one lump sum, even if doing so is not in their best interest. There is no requirement that your beneficiary stretch out distributions to minimize income taxes or maximize tax-deferred growth. A trust beneficiary receives distributions only as directed by the Trust document. So, if you want to ensure that your loved one’s inheritance is protected from creditors, poor judgment, or romantic influences, designating a Trust as the beneficiary of your IRA may be advisable.

• Protecting Benefits for those with Special Needs.

A disabled individual who receives public benefits such as SSI or Medicaid risks losing those benefits when they inherit directly from an IRA. In these cases, it is almost always preferable to designate a properly drafted supplemental needs trust as the beneficiary of the IRA account rather than the disabled individual.

Naming the Trust as a beneficiary of your IRA account can have some benefits, but it can also be risky and is not recommended in all cases. Be sure to have your Trust reviewed by a qualified estate planning attorney before simply naming it as a beneficiary of your retirement account. Failure to seek legal advice could result in unintended and expensive consequences.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. Securities and Advisory Services offered through LPL Financial, a Registered Investment Advisor, Member FINRA, SIPC.

Louise Paglen, Attorney

The McIntosh Law Firm, P.C. McIntoshLawFirm.com

True Wealth– Revisiting Your Plan

This month’s issue highlights the many great opportunities to be social around Lake Norman. After a period of being secluded, chances are, your retirement lifestyle planning was put on hold too during the past 16 months. I suggest it is time to revisit your dreams, your plans, and get back on track with a mid-year review.

Your financial plan supports your dreams, goals and desires which are emotional, yet also requires analytics to know the numbers are adding up. What you emotionally desire matters. To re-energize the process, here are a few ’feeling’ and “analytic” questions to get you started.

• How did the emotional rollercoaster of last year affect what you (and/or partner) hoped to add to your experience bucket? • How concerned are you about living too long and running out of money? • Are you considering medical care that goes along with living longer? • Did your view of investment risk shift as a result of stock market fluctuations in value, on a shortterm basis? • Did you react to COVID with portfolio changes? Should you adjust again, using your updated goal review?

Statistics reveal that the general stock market fluctuates 15 percent in any given year. That suggests that on a short-term basis, it does matter when you invest your money, especially if in a single lump sum. On a long-term basis, this has less impact as the S&P 500 has historically had greater average returns than either high quality fixed income or inflation.

I mention inflation rates because of media emphasizing the skyrocketing increases in expenses which could impact your retirement lifestyle. Is this a temporary, short-term bump, or is it going to be with us for a longer time? Just as important as stock market volatility potentially reducing your retirement lifestyle income is the risk of loss of purchasing power. Short-term events can temporarily halt our pursuit of life experiences with long-term inflation effects, ultimately causing you to outlive your money!

As you have heard me say before, you can dream it and begin to pursue it, but in between, you need to plan for it. Regularly revisting your financial plan is how you get back on track.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. Securities and Advisory Services offered through LPL Financial, a Registered Investment Advisor, Member FINRA, SIPC.

Jeffrey Karp, CLU®, ChFC®, CASL® founder of Karp Financial Strategies and is a registered representative of LPL Financial. More information and his blog, Permission GrantedSM can be found at www.karpfinancial.com.