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The Wall Street Journal quotes Natalie Choate in “The Ins and Outs of Trusteed IRAs”

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12.16.2013

Natalie Choate, a member of the firm’s Trusts and Estates Department, was quoted by The Wall Street Journal in “The Ins and Outs of Trusteed IRAs” on December 16. The article discusses trusteed IRAs, a traditional individual retirement account with some of the estate planning advantages of a trust that an increasing number of financial services companies are aiming at baby boomers who plan to leave IRAs to their heirs. Trusteed IRAs are designed to provide a long term distribution plan for withdrawals and although they cost more to administer, they are less costly than setting up trusts and less likely to run afoul of tax rules.

However using a trust to inherit an IRA poses risks: the trust could pay higher taxes than your heir would because trust tax rates are higher than most individuals’ income tax rates, and the IRS could decide that the trust doesn’t qualify as a “see-through” or “conduit” trust, meaning your heirs wouldn’t qualify to take stretched out withdrawals even though you may have set the trust up to do just that. Examples of trusts that fail to qualify typically include those with beneficiaries who aren’t people, such as the estate, a charity or another trust. “Since those entities don’t have life expectancies, stretched-out withdrawals would not be allowed for any of the other beneficiaries involved,” says Natalie.

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