Wondering if a Trusteed IRA is right for your clients? There are two types of Individual Retirement Accounts (IRA), a Custodial IRA and a Trusteed IRA. A Trusteed IRA merges the tax benefits of an IRA with the asset protection of a trust. With a Traditional Custodial IRA, the account is controlled by a custodian.  With a Trusteed IRA the account is controlled by a trustee.

In a typical IRA, the beneficiary will take control of assets upon your clients passing, and can withdraw whatever they want, whenever they want. With a Trusteed IRA your clients control how, when, and in what amounts their assets are distributed across multiple generations.

A Trusteed IRA, may be a good choice if your clients have:

• A blended family, where they want to provide for their current spouse, while also making sure that the remaining IRA assets pass to their children from a previous marriage.
• Concerns about heirs readiness to inherit wealth. Especially if they are worried about children who may struggle with dependencies, or who aren’t yet financially responsible. They can restrict distributions, beyond those required by the IRS, by specifying contingencies upon the beneficiary reaching specific milestones, such as completion of college, reaching a certain age, or completing a rehabilitation program.
• Are concerned about IRA management in the event of incapacity.
• If they have a larger IRA, and want the benefit of the historic established trust structure. Custodial accounts may not be clear on which state law governs the account in the case of post-death disputes. It is relatively easy to establish the applicable state law in the case of a trust.
• If they would like an additional layer of protection from creditors a Trusteed IRA can help. An IRA has creditor protection under federal law, and also under many states’ laws, regardless of whether it is a custodial account or a trust. But, if the custodial IRA loses its tax status (which creditors seek to attack for just this reason), it loses those protections. A trusteed IRA is still a trust; even if its tax status as an IRA is successfully attached, and trust status will typically afford an additional layer of protection against creditors.
• Want to extend the tax-deferral of a traditional IRA or any tax-free earnings accumulation of a Roth IRA to benefit children, grandchildren or other heirs. 
• Want to preserve continuity of IRA management during lifetime and after death,
• Have a non-U.S. citizen spouse. 
• Would like to have the freedom and ability to continue working with the trusted financial advisor of their choosing. 

The Trusteed IRA structure allows you to offer your clients more flexibility in their estate plan. If you have questions, Peak Trust Company is here to help. Click here to contact a member of our team.