Trusteed IRA

PEAK ADVANTAGE TRUSTEED IRA

Family structures are so varied these days, which makes it a challenge to stay in control of your estate planning.  This is why Trusteed IRAs are gaining in popularity as a versatile estate planning solution. Trusteed IRAs combine the control, longevity and asset protection advantages of a trust, with the tax-deferral benefits of an IRA.

In a typical IRA, the beneficiary will take control of your assets upon your passing, and can withdraw whatever they want, whenever they want. With The Peak Advantage Trusteed IRA (PATI) you control how, when, and in what amounts your assets are distributed across multiple generations.

Simply put, PATI is designed to preserve the tax advantage of your retirement assets for as long as possible, while providing maximum control over how the assets are passed onto future generations. One of the advantages PATI offers over other trusteed IRAs is the assurance that assets can be professionally managed and invested by your trusted financial advisor. Few companies offer this type of flexibility in their estate planning solutions.

When properly structured and managed using PATI,  your retirement assets may be able to provide a legacy that can have a lasting effect on your family

What Is A Trusteed IRA?

Under Tax code, both a Traditional Custodial Individual Retirement Account (IRA) and a Trusteed IRA are considered identical. 

The difference between the two vehicles is in how they are structured. With a Traditional Custodial IRA, the account is controlled by a custodian.  With a Trusteed IRA the account is controlled by a trustee.

A Traditional Custodial IRA and a Trusteed IRA both adhere to the same standard IRA tax rules, including:

  •  the ability to deduct IRA contributions when the requirements are met
  • the taxability of distributions when received
  • the potential for early withdrawal penalties prior to age 59 ½,
  •  the obligation to take required minimum distributions (RMD) after age 70 ½.

 

Although the difference in structure might seem like a minor nuance, since everything else is the same, it makes a huge difference both during the life of the IRA owner, and more importantly after they are gone. 

What are the responsibilities of a Custodian vs.Trustee?

With a typical IRA,  the duties of the financial institution are limited to:

  • Holding the account assets. 
  • Keeping track of deposits, distributions, and investment changes. 
  • Reporting to the IRA owner regarding the IRA investments. 
  • Filing required tax reports with the IRS. 

 

With a trusteed IRA, in addition to all same duties of a custodian, Peak Trust Company is also responsible for: 

  • Distributing funds for the benefit of the IRA owner, ( when the trust has been set up this way by the owner). This might be requested if the IRA owner is incapacitated and wants the trustee to pay their bills. An IRA custodian cannot do this. 
  • Carrying out the IRA owner’s instructions after the IRA owner’s death, restricting the rate at which the beneficiaries receive access to the funds. An IRA custodian cannot do this—beneficiaries of a custodial IRA have unlimited access to the inherited account. 
  • Paying out a required minimum distribution(RMD) each year after the owner’s death, and also (in the case of a traditional IRA) during the IRA owner’s life after age 70 ½.  Peak Trust Company will compute and pay out the RMD each year as part of its duties. A custodian does not do this, leaving the IRA owner vulnerable to the excise tax when illness or any mishap causes failure to take the RMD.
Is a Trusteed IRA right for me?

A Trusteed IRA  is a versatile estate planning solution, because it combines the control, longevity and asset protection advantages of a trust, with the tax-deferral benefits of an IRA. 

The Peak Advantage Trusteed IRA, may be a good choice for you if you have:

  • A blended family, where you want to provide for your current spouse, while also making sure that your remaining IRA assets pass to your children from a previous marriage.
  • Concerns about heirs readiness to inherit wealth. PATI can help, especially if you are worried about children who may struggle with dependencies, or who aren’t yet financially responsible. You can restrict distributions, beyond those required by the IRS, by specifying contingencies upon the beneficiary reaching specific milestones, such as completion of college, reaching a certain age, or completing rehabilitation programs.
  • Are concerned about IRA management in the event of incapacity.
  • If you have a larger IRA, and want the benefit of the historic established trust structure. Custodial accounts may not be clear on which state law governs the account in the case of post-death disputes. It is relatively easy to establish the applicable state law in the case of a trust.
  • If you would like an additional layer of protection from creditor a Trusteed IRA can help. An IRA has creditor protection under federal law, and also under many states’ laws, regardless of whether it is a custodial account or a trust. But, if the custodial IRA loses its tax status (which creditors seek to attack for just this reason), it loses those protections. A trusteed IRA is still a trust; even if its tax status as an IRA is successfully attached, and trust status will typically afford an additional layer of protection against creditors.
  • Want to extend the tax-deferral of a traditional IRA or any tax-free earnings accumulation of a Roth IRA to benefit children, grandchildren or other heirs. 
  • Want to preserve continuity of IRA management during lifetime and after death,
  • Have a non-U.S. citizen spouse. 
  • Would like to have the freedom and ability to continue working with the trusted financial advisor of your choosing. 

 

The Trusteed IRA structure allows you to meet all of these needs and others as well. 

How Do I Set Up My Peak Advantage Trusteed IRA?

To set up your Peak Advantage Trusteed IRA you can either Contact our Client Service coordinator directly for opening documents. By calling Deb Erdmann at 702.462.6677  or download the appropriate opening documents below.

PATI Roth IRA Application

IRA Application

Beneficiary Designation Form

Beneficiary Designation Form

Roth IRA Application