IRAs and Retirement Plans are quirky. Planning for them involves Federal income tax law, Federal estate tax law, Federal ERISA law, and Florida asset protection law and inheritance law. Let Your Caring Law Firm help you design a stand-alone revocable trust, funded at your death with your retirement assets, to maximize the benefits under all of these sometimes conflicting laws. Compared to your regular revocable living trust, the IRA trust is more of a race car than a minivan. It only fits your retirement plan assets-it does not comfortably fit you, your loved ones, your assets, your pets, and your baggage-but it does fit your retirement plan assets very, very well.
Most often, people who inherit retirement plans cash the plan out, pay income tax on the funds received, and buy a car or a kitchen or a pool with the remaining funds. You can avoid this frittering of your wealth.
The IRA trust creates separate sub-trusts for each of your loved ones, allowing for “stretch-out” under IRS rules. Your beneficiary designation form names the sub-trusts of your IRA trust as the beneficiary of your retirement plan. Each sub-trust is counted as a designated beneficiary, so each individual beneficiary’s life expectancy determines the required minimum distributions. The assets remaining in trust continue to be considered IRA assets by the IRS. This means that earnings grow tax deferred-income tax is paid only when the funds are withdrawn. The trust terms-written by you-dictate the distribution of funds to beneficiaries, offering control to you and asset protection to your loved ones. Our professional attorneys will counsel you to determine if this trust is right for you.
Special Needs Trust
Disabled beneficiaries who directly receive an inheritance risk losing their government benefits. A special needs trust is an irrevocable trust that helps protect the disabled beneficiary. Your loved one continues to qualify for government support, but also benefits from your wealth.
Keep in mind that there may be many people who have your disabled loved on in their plans. No matter how well-meaning, folks who leave money directly to your disabled loved one jeopardize his or her government benefits. You may set up a SNT now, to catch any inheritances or gifts that you and others wish to make to your disabled love one.
Funds in the special needs trust can pay for care that Medicaid and other programs do not. Dental work, eyeglasses, dedicated therapies-your loved one obviously benefits from these. But don’t forget other quality of life issues, such as travel, education, and music. Properly drafted, a special needs trust can open doors for your loved one that you may not imagine.
Medicaid Asset Protection Trust
his very specific type of trust is not a do-it-yourself project! Attorney Hallie Zobel is experienced in Medicaid planning techniques; a Medicaid Asset Protection Trust (MAPT), is one example. Medicaid is a welfare-based government benefit that pays for skilled nursing care. You must meet Federal and State guidelines as to wealth (or, more accurately, the lack of it) to qualify for Medicaid. Certain assets count and certain assets do not count as part of your wealth. A Medicaid Asset Protection Trust is an irrevocable trust that you (or a married couple) may create. You place your assets into the MAPT during your lifetime. The trust proceeds pay out to loved ones during your life and after your death. Typically, the assets that you have placed in the MAPT do not “count”, yet are available to protect your loved ones. Variations of the trust include allowing income to be paid out to you during your lifetime.
Qualified Income Trust
A qualified income trust-the Miller Trust as it is known-is an irrevocable trust that distributes your income to you in a way that does not disqualify you from Medicaid. Medicaid is a welfare-based government benefit that pays for skilled nursing care. You must meet Federal and State guidelines as to wealth (or, more accurately, the lack of it) to qualify for Medicaid. Certain assets count and certain assets do not count as part of your wealth. Income also is a factor in qualifying for Medicaid. If you have an income too high to qualify for Medicaid, you may want to consider a Miller Trust. Your Caring Law Firm can help evaluate your situation to determine if this is the right vehicle for your needs.
Irrevocable Life Insurance Trust
We often prepare separate trusts just to hold life insurance policies and administer the proceeds after death. An irrevocable life insurance trust is a special type of trust that cannot be materially changed or terminated after it is set up. Properly designed, the ILIT offers your loves ones liquidity at your death, but keeps the policy proceeds out of your probate estate. In addition, the IRS should not consider the proceeds to be part of your estate, thus not subject to estate taxes at your death. An irrevocable life insurance trust is a terrific vehicle through which to provide your loved ones money to pay ongoing living expenses or any estate taxes due. We will counsel you as to when an irrevocable life insurance trust may be useful to you. We also offer continued counsel throughout the life of this trust.
Revocable Living Trust
Created during your lifetime, your revocable living trust is your alter ego. Designed to be the minivan of trusts, the revocable living trust carries you, your loved ones, your assets, your pets and all of your baggage along the road of life. It may be amended or terminated any time while you are competent. Your revocable living trust becomes irrevocable upon your death.
You do not need to be wealthy to use a trust. In Florida, most people use a revocable living trust to dictate in advance who will help them with their paperwork and finances if they no longer can handle their affairs, and also to avoid probate. Probate is a court proceeding that transfers the title of your assets after your death. The Florida courts are underfunded and overworked; a revocable living trust helps avoid depending on court intervention to meet your goals.
If you are a private person, a revocable living trust offers you privacy. Wills are public record at your death; the terms of your revocable living trust are not. This can become a very important issue, particularly if you are in an unmarried relationship. It is not anyone’s business to whom you leave your money. Make sure that your documents — and the names of those you love — stay out of the public eye.
If you have charitable intent, one of the wonderful ways to support your charity and also your loved ones is with a split trust. With this type of planning, you establish an irrevocable trust. Someone gets income now, and someone else the remainder later. Your loved ones may be the beneficiary now, with the remainder of the trust assets going to your charity. This is known as a charitable remainder trust. Alternatively, your charity may be a beneficiary now, with the remainder of your trust assets going to your loved ones. This is known as a charitable lead trust.
Charitable trusts are complex. As the grantor (the person who set the trust up), you may get income tax benefits, as well as estate and gift tax benefits. Our professionals counsel you on whether this type of planning would best meet your charitable intent.