Irvine, CA (PressExposure) January 07, 2009 -- James Burns, principal of the Law Office of James Burns and author of the international best seller "The 3 Secret Pillars of Wealth" recently commented on one strategy his office is using that names a specialized trust as the designated beneficiary of an IRA and has several very important advantages over directly naming beneficiaries.
Burns said, "first, beneficiaries who are minors tend to not be prudent with money, older ones have marital or creditor issues, or may be disabled." In addition, if the beneficiary dies before distribution, the contingent beneficiaries may not be correct or the beneficiary may intentionally or unintentionally withdraw proceeds from the IRA creating tax problems.
Mr. Burns thinks that naming the client's revocable living trust as the beneficiary, even with the appropriate "conduit-trust" language, may create issues with the age of beneficiaries in order to "stretch-out" the required minimum distributions the Internal Revenue Service requires.
Burnsâ office is one of few that offer the IRA Beneficiary TrustÂ® which insures that client beneficiaries âstretch-outâ their taxable, required minimum IRA distributions over a longer period of time. And, if done right, the IRAs can continue to compound for many years income-tax free, literally growing to be worth millions of dollars.
Burns states, "even if you assume that your children or beneficiaries will do the right thing" â that is, keep the funds in the IRA account for their lives to maximize the income tax âstretch-outâ of the IRA, the IRA may still be seriously exposed to numerous threats that can arise years after you depart.
When clients have a reasonable sizable IRA they want to pass down or donât think theyâll need to live on their IRA, they absolutely should be thinking about this strategy.