It’s not often we see the words “Congress” and “Tax Relief” in the same sentence, but Congress made tax saving waves in 2003 by substantially changing the taxation of tax-deferred retirement accounts for beneficiaries. This law change affects investments in tax deferred retirement accounts such as 401(k), 403(b), Traditional IRA, Roth IRA, SEP, and Keogh accounts, among others.
No longer will a beneficiary be forced to withdraw all of your hard earned, tax-deferred investments in a very short five year period after you die. This old rule had devastating effects on the taxable income of your beneficiaries, including pushing them into higher income tax brackets, imposing tax liability each year on all future investments, and importantly, leaving their inheritance vulnerable to creditors and predators of all types.
After the 2003 law change, beneficiaries of your retirement accounts may choose to “stretch” distributions out of the Inherited IRA account over their individual life expectancies! This means that a beneficiary is only required to withdraw a small portion of the total value of the account each year, leaving the rest of the money to grow tax deferred!
Just look at these incredible numbers...
At age 85 your child will have already received about $1,000,000 in distributions and still have almost $500,000 remaining in the IRA accounts (which may continue to grow tax deferred and eventually be passed on to your grandchildren!)
As result of the "stretch" rules, your IRAs and similar tax-deferred accounts may be well worth more than $1 Million and may be the very largest assets you pass on to your loved ones.
Now that your children can “stretch” minimum distributions over his or her life expectancy, that money has the potential to grow, tax deferred, for many years to come. But what happens if someone takes that Inherited IRA account from them in a lawsuit? What happens if your child is a poor money manager or a spendthrift? What if you want to leave IRA money to your minor grandchildren, and you unwittingly force those grandchildren through a guardianship after you die in order to get it? What if you leave IRA money to a young adult who doesn’t do the “Stretch Out,” but unwisely wastes the money and does a “blowout” instead?
These concerns and more threaten beneficiaries of your retirement accounts. Fortunately, there is something that you can do to protect your family.
The IRA Inheritance Trust® is a unique trust specifically designed with your retirement accounts in mind. Using this trust can not only insure that your children may take full advantage of the 2003 “Stretch” rules, but can also give them lifelong protection from the many ways they could lose that inheritance.
To learn more about how this tax law change can positively affect your children and grandchildren, including examples of how your retirement accounts can continue to grow even after you pass away, please come to our FREE SEMINAR.
For more information about IRA Inheritance Trusts®, please click here to select a seminar to attend and register today!
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