Atlanta trust lawyers are abuzz following a recent US Supreme Court decision that will have big implications for clients. The fact that these professionals keep up-to-date on legislation and court decisions that affect their clients is one of the most important reasons not only to hire an estate planning lawyer in the first place, but also to check in with the attorney at least annually to see if any changes need to be made to a previous plan in light of new information.
While a person’s own IRA can be protected in the case of bankruptcy, the court has determined that an inherited IRA cannot. While that is big news for those who have already inherited an IRA, it is a call to action for those planning to leave one behind. Being aware of the consequences of the Court’s decision can drastically change the approach to planning in order to protect heirs from this new development.
It is common for estate planning lawyers in Atlanta to see clients who have much of their wealth in the form of an IRA or 401(k). During the planning process, they determine how that money should be used after their death. It often makes up a large part of the estate they intend to leave behind. As of recently, this was commonly done by placing it into a Revocable Living Trust. Now, however, if the heir declares bankruptcy, that money can be taken away.
A Real-Life Example of Savings and Loss
The possibility of losing an inherited retirement account in this manner is more common than you might expect. Take for example the case of Joan and Robert. Robert worked hard to save for retirement, accumulating $450,000 in his 401(k). Unfortunately he was also diagnosed with a serious medical condition and accumulated over $300,000 in medical debt before he passed away.
After his death, his wife transferred the funds of the retirement account into an “inherited” IRA so that she could access the money without having to pay a 10% penalty before age 59 ½ . That money was her lifeline.
However, the medical bills spiraled out of control and were eventually turned over to a collection agency. Unable to pay back the balance, Joan was forced into bankruptcy. Little did she know that the money in her “inherited” IRA could now be seized by creditors during the bankruptcy proceedings. Had Robert planned for this possibility, the funds would have stayed protected.
Protecting Wealth In An IRA For Beneficiaries
In order to protect money in an inherited retirement account, many estate planning lawyers in Atlanta are now recommending that their clients consider setting up a Standalone Retirement Trust. This type of trust can protect against other threats, too. Basically, it makes the money inaccessible to any future creditors of the trust’s beneficiary because the trust was not established or funded by the beneficiary. By naming an independent trustee rather than having the beneficiary play this role, there are even more protections in place. An Atlanta trust lawyer can offer a variety of suggestions on how to choose the appropriate trustee.
There are some fairly stringent guidelines that need to be followed to make sure the trust works as intended. A trust lawyer in Atlanta will need to make sure these regulations are adhered to so that the trust can qualify. When done properly, the trust’s distributions can be made similarly to how they would have from the IRA without the risk from the beneficiary’s creditors.
Whether you are just beginning the planning process or you have already created an estate plan, this big decision by the US Supreme Court can affect you and those you leave behind. Make sure to contact your trust lawyer in Atlanta to ensure that your IRA is protected for the next generation.
The decision of who to appoint as your executor or trustee is a huge one, and we’ve talked about it a bit in the past. Still, it’s important to make sure that you have the information you need to make the right choice with your Atlanta estate lawyer. This person will hold incredible responsibility for overseeing what becomes of your estate, and you want your choice to reflect this.
It’s not unusual to name your spouse as the executor or trustee, but there are certainly other options. You may determine that one of your adult children is a good choice or prefer to have a family friend in charge. In some cases, you may even place an attorney in the role. No matter who you choose, you’ll want to also list an alternate in case there is some reason your first choice is unable to take care of the duties required.
Some things to consider when choosing your executor or successor trustee:
- The process of closing an estate can take a very long time, so you want to choose someone who will be committed to following through.
- The person chosen will have access to your finances, and there are opportunities to abuse the trust placed in him or her. For this reason, among others, you want to choose a representative in whom you have complete trust.
- There are many details and conflicting interests that will need to be managed during the process, so you want to choose someone who is organized and able to juggle these responsibilities.
- Dealing with the estate requires working with a wide range of people and institutions. The person you choose to represent you must be able to clearly communicate with all of them.
- Because there are a lot of financial considerations to be made, it’s also best to choose someone who is responsible with money and has a decent grasp of how to manage it.
- The person chosen will likely need to spend time in your home or business, going to court, meeting with attorneys, etc. For this reason, estate lawyers in Atlanta will often recommend you choose a representative who is physically available, possibly even someone living in the area.
Finally, you want to ensure that the person you name to handle your estate is willing to take on the job. It’s best to discuss the responsibilities and expectations with him or her to make sure it’s something the person feels up to taking on. Spouses or children may feel like they would be unable to do the job in the midst of their grief, others may just not want the responsibility. By discussing it with them before having your Atlanta estate lawyer name them in your documents, you won’t be adding an extra burden to someone who isn’t able to accept it.
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One of the jobs of an Atlanta Georgia trust lawyer is to help clients choose the person who will be responsible for a trust that has been set up. The trustee has several very important jobs, and things will go smoother if he or she is aware of these responsibilities up front. Here is some good information that should be shared with a trustee in order to administer the trust with as little difficulty as possible when the time comes.
One Reason “Trust” Is So Important in the Word “Trustee”
In order to ensure that the trust administration goes according to plan, the trustee should review the document that set it out in the first place. It makes sense to do this while the person creating the trust is still alive so that you can talk about the true intentions behind the trust. Both parties may choose to sit down with the Atlanta trust lawyer in order to talk through any confusing points. When it comes time to administer the trust, the trustee will have valuable insight on what was originally intended and how to bring those goals about.
Along those same lines, it is the trustee’s responsibility to make sure that he or she is acting in the best interests of the beneficiaries. If there is a question about how best to manage the assets, the attorney can be brought in for advice and to make sure that decisions being made are in line with Georgia state and federal laws. For this reason, it’s imperative to choose a trustee who not only has good business sense but who is also extremely trustworthy. He or she should understand that the trust is not for personal gain and be able to withstand temptation to use the trust for his or her own benefit.
Keeping Track of the Trust
The trustee’s main focus should be to manage the assets of the trust in the most effective way possible. This may mean investing money in smart ways and also includes distributing funds to beneficiaries when appropriate. One of the easiest things the trustee can do to keep track of funds is to open a checking account for the trust. Any money that comes in or goes out of the trust can go through this checking account, creating an easy-to-see method for tracking income and expenses.
As an added safeguard, the trustee should provide an annual accounting of the trust to the beneficiaries. This allows them to understand how the trust is being managed. It may also be appropriate to provide this information to your Atlanta GA trust lawyer or other legal entity. Keeping in regular contact with the beneficiaries ensures that they are benefitting appropriately from the funds and also develops a relationship of trust between the parties involved.
GeorgiaFamilyLaw : Worrall Law LLC is Your Family’s Lawyer for Life™. We help families protect the people they love and things things they care about with plans that will work when your family needs it the most. Call us today at 770-425-6060 to schedule your Georgia Family Legacy Planning Session ($750 value) at no charge.