Trusteed IRA: Where Retirement and Estate Planning Meet

Prepare for your retirement, your estate and the unexpected.

Retirement assets totaled $35.7 trillion at the end of September 2023. Of those total assets, $12.6 trillion were in IRAs. IRAs play an important role in retirement, and if yours has a large balance or if it constitutes a considerable portion of your wealth, you’ll want to preserve it for the future and well-being of your loved ones. 

A trusteed IRA can help address larger wealth transfer goals – one of which is having greater control over how your assets are distributed to your heirs – while retaining the function of a traditional or Roth IRA and keeping you in control when the unexpected happens. After all, the more complex your estate, the more control you’ll want to carry out your wishes.

The best of both worlds

Most IRAs are held in a simple custodial account. When the owner dies, the beneficiary has unlimited access, meaning your heir – usually a spouse, child or grandchild – can withdraw assets at any time. This may be acceptable for smaller accounts, but if you have a significant balance in your IRA, you may want to put some rules in place.

A trust can serve as a much more comprehensive and effective vehicle for distributing your assets and carrying out your wishes. While appointing an executor is still common practice for small or simple estates, a trustee – especially a professional one – is better equipped to manage estates of significant complexity or size.

Who it’s for

A trusteed IRA gives the heightened control and option for professional management of a trust to your retirement account – allowing your IRA to become a strategic part of your estate plan. You might find a trusteed IRA beneficial if you:

• Want greater control over how your assets are distributed to heirs, such as who, how much and when
• Have a blended family with heirs from a previous marriage that you want to receive benefits from your IRA account
• Are concerned for heirs who may suffer from addiction or are otherwise incapable of managing their finances responsibly
• Need to ensure the continuity of your investments, distributions and bill payments in the event of your incapacitation

SECURE Act considerations

The SECURE Act of 2019 has widespread impact on all sorts of factors relating to retirement – and IRAs are no different. Even when inheriting a trusteed IRA, your non-spousal beneficiaries will likely be subject to the 10-year rule, requiring them to empty the account within 10 years. Your advisor can help you understand exceptions to this rule and how they might affect your plan.

The bottom line

For those who want to add control, confidence and continuity to their retirement and estate plans, setting up a trusteed IRA is simple. Talk to your advisor to determine if it’s the right choice for you. They can also connect you with a trust manager to get started.

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Raymond James does not provide tax or legal advice. Please discuss these matters with the appropriate professional. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

Sources: Bank of America; FSKS; HBKS Wealth Advisors; Merrill Lynch