A Stretchout Protection Trust that is specifically designed to receive your retirement accounts for tax efficiency and asset protection. A Stretchout Protection Trust is separate from your Will or Living Trust. During your lifetime, you remain the owner of your retirement plan, but you name the Stretchout Protection Trust as the beneficiary of the account upon your death.
Frequently, the Stretchout Protection Trust will be designed to match the distribution pattern of your Will or Living Trust, but the Stretchout Protection Trust is designed precisely to comply with the IRS rules. This will ensure that your beneficiaries remain eligible for the Inherited IRA “stretchout” option.
In addition to ensuring your beneficiaries get the most out of their “stretchout” option, a properly structured Stretchout Protection Trust can provide several powerful protections. If someday your child goes through a divorce, the retirement accounts are completely protected. If your child is sued or files for bankruptcy, the retirement accounts are protected. If your child dies, the Trust ensures that the funds remain in your bloodline and continue on to your grandchildren.
If your child or beneficiary is a minor, you can specify who should serve as Trustee while they are young. Plus, rather than your child gaining full control of the account at age 18, you can choose the age your child gains access to the account.
If your beneficiary is disabled or has special needs (or becomes disabled in the future), the Stretchout Protection Trust can qualify as a “Special Needs Trust” so that the assets don’t count against your beneficiary when he or she is qualifying for Medicaid, SSI, or similar government benefits. This built-in protection allows the inherited money to be spent on allowable expenses, typically things not covered by Medicaid or SSI, so that your beneficiary has a better quality of life while still receiving their important medical benefits.
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IRA & Retirement Plan "Stretchout" Protection Planning Series:
Our series on "Stretchout" Protection Planning for your Individual Retirement Accounts (IRAs), Roth IRAs, 401(k)s, 403(b)s, and other qualified retirement plans will show you how to protect and maximize these tax-advantage accounts for a lasting legacy for you and your family:
Additional information and examples are provided in our book, Supercharge Your IRA, including:
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