Each and every Ohio family has a unique set of needs when it comes to creating an estate plan. Passing down accumulated wealth to one’s children is a common estate planning theme. However, there are cases in which all of a couple’s children are already doing well for themselves, and where the focus can turn to the next generation. Retirement trusts are an excellent option for families who are looking for ways to pass wealth down to grandchildren.
A retirement trust is funded by retirement investments. Those assets are then “owned” by the trust itself, and are therefore removed from the person’s estate. In a retirement trust, the individual’s children disclaim some or all of their interest in the trust, passing those rights down to their own children. When the account holder reaches 70.5 years of age, required minimum distributions (RMDs) will be triggered. These small amounts will not have a significant impact on the base value of the trust, and each child can use his or her age to calculate the RMD.
The benefit of a retirement trust is that it allows the assets to grow steadily on a tax-free basis for a long period of time. That can allow a huge increase in the original amount held in trust. The net effect is a substantial asset for one’s grandchildren, with the added protections that come with holding wealth in any form of trust.
Retirement trusts are a great choice for many Ohio families. Determining whether this is a solid option requires a discussion among family members, as well as a shared goal of providing for grandchildren as a long-term planning strategy. In cases where the middle generation is already financially secure, this can be a very appealing estate planning strategy.
Source: wealthmanagement.com, “Estate Planning for an Aging Population“, John M. Goralka, July 5, 2016