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Warning: Don’t Let Creditors Inherit From You

How to Protect an Inherited IRA from Creditors

3 Options Available To Surviving Spouses for an Inherited IRA

Shocking to most people, the retirement account you leave for your spouse can be seized in a divorce, lawsuit, or bankruptcy. When your surviving spouse receives the inherited IRA, he or she generally has three options:

 

  1. Cash out the inherited IRA and pay the associated income tax.

WARNING: the cashed-out IRA will not have creditor protection and accelerates taxation.

 

  1. Maintain the IRA as an inherited IRA.

WARNING: the cashed-out IRA will not have creditor protection.

 

  1. Roll over the inherited IRA and treat it as his or her own.

WARNING: the cashed-out IRA will not have creditor protection.

It’s frustrating to many that a stranger can swoop in and take their hard earned money; fortunately, there’s a solution and that solution is a retirement trust.

 

Standalone Retirement Trusts Provide Protection

A Standalone Retirement Trust (SRT) is a special type of revocable trust designed to be the beneficiary of your retirement accounts after you die. It can protect your assets from creditors. In fact, we can include trust provisions which specifically benefit your spouse in situations such as:

  • Second marriages
  • Divorce
  • Lawsuits from car accidents, malpractice, or tenants
  • Business failure
  • Bankruptcy
  • Medicaid qualification

 

Want To Know More?

The bottom line is that a properly drafted SRT is often your best option for protecting your retirement assets (and providing the bonus of tax deferred growth). Want to know more? Contact McDonald Law Firm today at 443-741-1088 to schedule a conversation. We look forward to working with you.

 

DISCLAIMER: THE INFORMATION POSTED ON THIS BLOG IS INTENDED FOR EDUCATIONAL PURPOSES ONLY AND IS NOT INTENDED TO CONVEY LEGAL ADVICE.

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For help with estate planning, special needs planning, elder law or Veteran's Pension Planning needs throughout Howard, Montgomery, Prince George’s, Anne Arundel, and Baltimore County; and Baltimore City, contact McDonald Law Firm, LLC.

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