Retirement Planning

IRA Inheritance Trust Attorney Serving DuPage County, Kendall County, and Will County

Sean Robertson and Robertson Legal Group, LLC concentrate on estate planning and asset protection planning for affluent couples, business owners, and physicians. Sean Robertson counsels couples and individuals about wealth preservation and wealth management in the Naperville, Aurora, Lisle, Batavia, Geneva, Oswego, and Wheaton areas. Often, a significant portion of a couple’s wealth is comprised of retirement accounts such as individual retirement accounts (IRAs), Roth retirement accounts, 401(k)s, and other defined benefit and defined contribution accounts.

Unfortunately, a Revocable Living Trust is ill-suited to be named as a beneficiary of your retirement accounts for several reasons. Naming a Revocable Living Trust—which may also be called a “Family Trust” or “Declaration of Trust”—as a beneficiary of a retirement plan may result in the potential loss of your income tax deferral. In recent years, Retirement Plan Trusts, also known as “IRA Inheritance Trusts” or “IRA Legacy Trusts” have become popular planning tools.

Naperville and Aurora families with over $200,000 in retirement assets such as IRAs should consider a Retirement Plan Trust as an estate planning strategy. Compared to naming individuals as beneficiaries, naming a Retirement Plan Trust may be a better alternative for several reasons. First, an individual beneficiary may become disabled or require long-term care, putting any proceeds he or she receives in danger of being attacked by creditors such as Medicaid or the federal government.

The flexibility of a Retirement Plan Trust allows for the establishment of a Special Needs Trust in the event of a disability or creditor concern. Thus, a major strategy behind a Retirement Plan Trust is asset protection and creditor protection. Furthermore, a Retirement Plan Trust enables the beneficiaries of your retirement accounts to realize their tax deferral benefits, which are the major advantage of a retirement account.

Another consideration for parents is the protection of your adult children against divorce concerns. The Retirement Plan Trust can contain a spendthrift provision which makes your adult child or children’s inheritance untouchable by their divorcing spouses.

Typically, a Retirement Plan Trust is a standalone Trust, which means that it is not created inside a Revocable Living Trust. A Retirement Plan Trust also achieves the objective of avoiding probate court.

With a Retirement Plan Trust, you can flexibly indicate your beneficiaries’ inheritance. For example, Sue and John Smith have four children, and they want to give their children unequal distributions for personal reasons. A Retirement Plan Trust makes this easy to do. Furthermore, if one of your desired beneficiaries passes away before you do, the Retirement Plan Trust can automatically address this concern.

A Retirement Plan Trust must meet the standards of Treasury Regulation 1.401(a)(9)-4, Q &A-5, which requires the following three criteria:

  • The Trust must be valid under Illinois law;
  • The Trust’s beneficiaries must be identifiable as being eligible to be designated beneficiaries themselves (such as individuals); and
  • The trust must be irrevocable or become irrevocable at the death of the original IRA Owner. Simply put, the IRA owner may alter, amend, or revoke the Retirement Plan Trust during their lifetime, including changing the beneficiaries, but upon their death, the Trust must be irrevocable.

Wheaton Retirement and Estate Planning Attorney

Sean Robertson and Robertson Legal Group, LLC are passionate about assisting couples and clients with their estate planning and asset protection goals. Unlike many estate planning attorneys, Sean Robertson’s niche is asset protection and wealth management. He also has a significant taxation background, which can be valuable for high net worth and middle-class clients because of the ramifications of tax concerns.

In addition to retirement planning, Sean Robertson and Robertson Legal Group, LLC assist couples with the following estate planning issues:

  • Planning Revocable Living Trusts;
  • Family Trust planning and estate and gift taxation planning;
  • Asset protection planning, including business, individual, and professional asset protection and wealth preservation planning;
  • Incapacity planning and setting up a power of attorney in place for events of disability;
  • Special Needs Trust planning and asset protection for disabled beneficiaries;
  • Setting up living wills and advanced healthcare directives;
  • Family limited partnerships and family limited liability corporations;
  • Irrevocable Life Insurance Trusts, also known as “ILITs”;
  • Dynasty Trusts for children; and
  • Tax Planning using Credit Shelter Trusts and Disclaim Trusts.

Contact Us for Help

If you have additional questions about retirement planning and Retirement Plan Trusts in Illinois, contact our Naperville office. Call 630-882-9117 for a free, no-obligation consultation. Robertson Legal Group, LLC serves clients in and around Lisle, Aurora, Wheaton, Winfield, Warrenville, Batavia, St. Charles, and Glen Ellyn.