Charitable remainder trusts might give you more options to pass down a big IRA and enable you to exert more control over how those heirs inherit these assets. The stretch IRA is now gone but saving in a tax deferred employer sponsored retirement plan has always been an easy way to save for retirement while also deferring current income taxes.
Many people choose to allocate a portion of their paychecks to go into 401(k)s which can later be transferred into IRAs while others save directly in IRAs. Lifetime IRA distributions can enable a retiree to maintain their standard of living long after they stop working.
Furthermore, after the death of the person who owned this account, the investor’s children can continue to take distributions that are taxed as ordinary income from it. Previously it was allowed to stretch this out over a longer period of time but that has changed with the passing of the SECURE Act which went into effect on January 1st, 2020. This means that many new account owners only have 10 years to empty an IRA account as the beneficiary (there are certain limited categories of account owners who have a longer period of time).
As a result of the change, the charitable remainder trust might be a more appropriate avenue. This allows for distributions of a fixed percentage or fixed amount to one or more beneficiaries over the course of life or for a term less than 20 years.
This allows a fixed percentage of trust assets at the time of inception to be given to current individual beneficiaries with the remainder going to charities. Discussing this option with your estate planning lawyer can help you get clarity over whether or not this might help accomplish your goals and make things easier for your beneficiaries.
Contact a Massachusetts estate planning lawyer to get more information about using trusts.
