IRA money jarDuring your lifetime, your retirement accounts are well protected from creditors, but as soon as you pass that account on to a loved one, that protection evaporates. This means one lawsuit and POOF! Your life long, hard earned savings could be gone. Your heirs could be left penniless.

In addition, under the new Secure Act, unless your beneficiaries fall within some very small subclasses, the entire retirement account will need to be distributed out to beneficiaries within 10 years.  However, the Secure Act now allows for some additional planning (such as accumulation trusts) that were not previously available.

Depending on how your spouse, child, or other loved one inherits your retirement account, their creditors may have the power to seize it and take it as their own.

If you’re like most people, you’re thinking of protecting your retirement account so your family can benefit – rather than the creditors. Here are 5 reasons to protect your retirement account:

1.You have substantial combined retirement plans. Spouses can use an accumulation trusts to shield one another from creditors.

2.You believe your beneficiary may be “less than frugal” with the funds. Anyone concerned about how their beneficiary will spend the inheritance should absolutely consider an accumulation trust as you can provide oversight and instruction on how much they receive – and when.

3.You are concerned about lawsuits, divorce, or other possible legal actions. If your beneficiary is part of a lawsuit, is about to divorce, file for bankruptcy, or is involved in any type of legal action, an accumulation trust can protect the inherited retirement accounts from those creditors.

4.You have beneficiaries who receive assistance. If one of your beneficiaries receives, or may qualify for, a need-based governmental assistance program, it’s important to know that inheriting from an IRA may cause them to lose those benefits. They also fall within a very specific subclass of beneficiary that can use their life expectancy for the distribution of the IRA over their entire lives.  An Stand-alone Retirement Trust can be drafted to avoid disqualification and allow for continued preferential tax treatment.

5.You are remarried with children from a previous marriage. If you are remarried and have children from a previous marriage, your spouse could intentionally (or even unintentionally) disinherit your children.  You can avoid this by naming the spouse as a lifetime beneficiary of the trust and then having the remainder pass onto your children from a previous marriage after your spouse’s death.

You’ve Worked Hard To Protect & Grow Your Wealth – Let’s Keep It That Way

You worked hard to save the money in those retirement accounts and your beneficiaries’ creditors shouldn’t be able take it from them. Talk to your estate planning attorney about how you can protect your assets as well as provide tax deferred growth for the beneficiaries of your estate.