How To Ensure Your Spouse Receives Your Retirement Accounts and Not Creditors
In most cases, spouses will inherit any of your retirement accounts (think IRA), which rolls into a personal retirement account that will be distributed over their lifetime. However, if you have a retirement account, the court can seize it during a bankruptcy, lawsuit or divorce proceeding.
3 Ways To Protect Your IRA For Your Surviving Spouse
How can you ensure your surviving spouse will get your IRA when you die?
- Cash the IRA Out And Pay Income Tax On It – There is no creditor protection if you cash out an IRA and speed up the taxation process. Once the money has been cashed out, the money can be used however the spouse wants. If your spouse has any money left at the time of their death, they can choose how the money is distributed… even someone you do not know.
- Keep An Inherited IRA – There is no creditor protection with an inherited IRA, but the Setting Every Community Up for Retirement Enhancement Act (SECURE Act), a spouse is permitted to use the minimum distributions of the account throughout their lifetime without being bound to the 10-year rule as other beneficiaries will be.
- Roll IRA Over and Treat It As Their Own – There is some protection from creditors with this option – some but not all. Plus, the spouse can leave their retirement account to anybody they choose, which can be a significant amount of money distributed 10 years after their death. This can speed up any extra income taxes for their beneficiaries.
To protect your assets from creditors, a surefire is to draft a well-thought-out standalone retirement trust.
How Does A Standalone Retirement Trust Protect Your Assets From Creditors?
An SRT is regarded as a special trust that works as a beneficiary of any retirement accounts after your death. It prevents creditors or others from seizing your assets, including in cases of:
- Second marriages
- Business failures
- Lawsuits from tenants, malpractice and car accidents
Where You Can Turn For Help…
If you want to protect your retirement assets from creditors, it’s imperative to have an SRT drafted. If you’re interested in learning more, we’ll be happy to discuss all your options and explain how an SRT will protect you and your loved ones after your death.