If you are like me, you probably care enough about your family that you want to protect them in whatever way you can. I feel that it is important to focus on protecting my family. Do you feel that way, too?

One of the ways of protecting them is by setting up a trust. But does this make sense for you to do this for your IRA accounts?

First, you may want to consider what some of the advantages are to setting up a trust as your IRA beneficiary. What are some of the reasons you may want to name a trust as your IRA beneficiary?

You should think about these potential advantages. The ability to:

• Control and manage your post-death IRA distributions to your beneficiaries.
• Preserve your large IRA or Roth IRA to make sure that your beneficiaries stretch their distributions over their lifetime.
• Set up an irrevocable trust for your beneficiaries to give them asset and creditor protection.
• Protect your beneficiaries in the event of divorces or second marriages.
• Protect your beneficiary that is a minor, disabled, incapacitated, a spendthrift, or unsophisticated and vulnerable to financial predators.
• Set aside your funds to be used to pay your estate taxes.
• Fund your charitable bequests through charitable remainder trusts.
• Secure your state estate tax exemption.
• Exclude your generation-skipping transfer tax exemption, which is not portable.

So, now that you have heard about all these advantages, what are the disadvantages of having you name a trust as an IRA beneficiary?

These are some of the disadvantages you should consider:

• Trusts are complex – you have a lot of tax rules to consider.
• Trusts are more expensive for you to create and maintain – you need to complete annual trust income tax returns and administration.
• Trusts incur high trust income tax rates if you retain the income within your trust vehicle in a discretionary trust – in 2015, you will incur the top income tax rate of 39.6% once your retained trust income exceeds $12,300 of taxable income.
• Trusts have no separate account rules, which means that if you have multiple individuals as beneficiaries in a single trust, the calculation of the required minimum distribution for that trust will be based on the life expectancy of your oldest beneficiary. This may be a disadvantage to your younger beneficiaries.

Now that we have discussed both the advantages and disadvantages of setting up a trust as your IRA, you should consider your own personal and family circumstances to determine whether or not a trust is the right vehicle for your beneficiaries.

This article is Part I of a three part series. Next week, I will talk about the key points you should consider when you are setting up the trust. Part III will address the key aspects you need to know about implementing trust after the death of the original account owner.

With the complexities involved, you want to make sure you understand the basics and find someone who knows what they are doing so that fatal mistakes are not made.

So think a little bit about your personal situation. If you have any questions, don’t hesitate to call the office and set up an appointment to discuss your situation in more detail.