Five Reasons to Protect Your Retirement Accounts Now

On Behalf of | Apr 13, 2021 | Firm News

Your retirement account provides asset protection during your lifetime, but as soon as you pass that account on to a loved one, that protection evaporates. When your spouse, child, or other loved one inherits your retirement account, creditors have the power to seize it and use the funds to satisfy their claims. This means one lawsuit and POOF!—your life-long, hard-earned savings could be gone, and your loved ones could be left penniless.

Fortunately, there is a solution. A special trust called a standalone retirement trust (SRT) can protect inherited retirement accounts from creditors and is something you should seriously consider using if any of these five scenarios ring true:

  1. You have substantial combined retirement plans. Loved ones can use an SRT to shield the retirement plans from creditors.
  2. Your beneficiary has a history of mishandling or being foolish with money. You should consider an SRT if you are concerned about how, or how quickly your beneficiary will spend an inheritance. SRTs can provide oversight and instruction on how much your beneficiary receives and when they receive it.
  3. You are concerned about lawsuits, divorce, or other possible legal actions. If your beneficiary is about to divorce, will likely file for bankruptcy, or is involved in any other type of legal action, a properly drafted SRT can protect the inherited retirement accounts from those judgment creditors.
  4. You have beneficiaries who receive assistance. If a beneficiary receives, or may qualify for, a needs-based governmental assistance program, it is important to know that inheriting an individual retirement account may cause the beneficiary to lose those benefits. An SRT can be drafted to avoid disqualification.
  5. You are married/remarried with children from a previous relationship. If you are married and have children from a previous marriage, naming your spouse as the primary beneficiary of your retirement account could allow your spouse to unintentionally (or intentionally) disinherit your children, even if you named your children as the contingent (backup) beneficiaries on the account. You can avoid this by naming your spouse as the lifetime beneficiary of an SRT, then having the remainder pass to your children after your spouse’s death.

You have worked hard to protect and grow your wealth–let’s keep it that way.

You worked hard to save the money in those retirement accounts, and your beneficiaries’ creditors should not be able take it from them. Give us a call and let us show you how an SRT can help you protect your retirement accounts.