Case # 7:      IRA Trust

Sam and Anna P., of Burlington County, New Jersey, raised four children. Sam passed away last year and Anna rolled over Sam’s IRA. She now has an estate of $1.6 million. $800,000 is in her IRA and the balance in her home, CDs and mutual funds.

The broker recommends that she take her IRA that is, essentially, a ticking tax time bomb and create an IRAtrust^TM. She changes the beneficiary designation of her IRA to the trustee of the IRAtrust^TM. When Anna passes away, the $800,000 IRA is transferred to the IRAtrust^TM, saving all of the income tax on the IRA.

It is invested for a term of 15 years and pays out just over $800,000 to the children during that time. After 15 years, approximately $1 million will be distributed to Anna’s favorite charity.

Each of the four children will receive almost $200,000 from the balance of the estate. Over a period of 15 years, each child will also receive $200,000 of income. Anna especially likes the way the plan is balanced. Each child receives principal when she passes away and then income for a term of years.

Anna believes that this is a desirable plan for the children and will also eventually help her favorite charity.