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How to Use a Standalone Retirement Trust (SRT) to Protect Your Inheritance from Creditors

Using a Standalone Retirement Trust to Protect Inherited Accounts from Creditors

Do you have an individual retirement account or other type of retirement account that you plan to leave to your loved ones? If so, proceed with caution. Inherited retirement accounts do not have asset protection when they pass to your loved ones, meaning creditors can seize the money in the accounts to satisfy any claims against your beneficiaries. Fortunately, retirement accounts can be protected, but only if you take action. Enter the standalone retirement trust (SRTs). Many people use SRTs – a special type of trust that can protect retirement accounts. 

What is a Standalone Retirement Trust (SRT)?

A properly drafted standalone retirement trust can do all of the following:

  • Protect the inherited retirement accounts from creditors, predators, and lawsuits
  • Ensure inherited retirement accounts remain in your family and out of the hands of a child’s spouse or ex-spouse
  • Allow for experienced investment management and oversight of the account funds by a professional trustee
  • Prevent the beneficiary from gambling away the inherited retirement account or spending it all on exotic vacations, expensive jewelry, designer shoes, and fast cars
  • Provide proper planning for a special needs beneficiary to avoid disqualifying the beneficiary from receiving needs-based government benefits
  • Allow you to name minor beneficiaries, such as grandchildren, without the need for court-supervised guardianship
  • Facilitate generation-skipping transfer tax planning to ensure taxes are minimized or even eliminated at each generation of your family

The Bottom Line

At McDonald Law Firm, we are here to help you navigate the best strategy for protecting your retirement accounts from your beneficiary’s creditors. Call Andre O. McDonald, a knowledgeable Howard County, Montgomery County and District of Columbia estate planning, special-needs planning, veterans pension planning, and Medicaid planning attorney, at (443) 741-1088; (301) 941-7809 or (202) 640-2133. We look forward to hearing from you soon.

DISCLAIMER: THE INFORMATION POSTED ON THIS BLOG IS INTENDED FOR EDUCATIONAL PURPOSES ONLY AND IS NOT INTENDED TO CONVEY LEGAL OR TAX 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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McDonald Law Firm, LLC

Columbia Office

10500 Little Patuxent Pkwy, #420
Columbia, MD 21044-3563

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7315 Wisconsin Avenue, Suite 800 West
Bethesda, MD 20814

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Washington, DC 20037

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