IRA Protection

Aler Stallings

Your IRA is your retirement fund, but if you aren’t spending it at a rate where you’ll exhaust it in retirement, Uncle Sam may end up getting much of it.

While you may not think you’ll spend your entire IRA on retirement needs, it is possible your family will get very little of it if you or your spouse need nursing home care. Do you have a plan to protect your IRA?

IRA Tax Planning

Retirement accounts are the most significant asset for many families and IRA tax planning is a big benefit. Conventional wisdom advises you to wait to pay taxes, but at AlerStallings, we know to protect your IRA, you must first pay taxes. By taking careful distributions beginning as early as age 59½ when the early-withdrawal penalty no longer applies, our clients maximize the amount of their retirement accounts that they get to keep.

For most clients, keeping a marginal tax rate of approximately 15% is achievable. Through a controlled distribution of their IRA, our clients often avoid extra money going to government by avoiding the higher tax brackets.

Taking money out of an IRA can help with planning for children. It’s a fact that you are generally in a lower tax bracket than your working children. Since IRA distributions are taxed as ordinary income, it’s often smarter to take distributions as soon as possible and pay taxes at your lower rate.

Lastly, early distributions can help lessen the tax impact when a spouse dies. We call it the widow’s penalty, where a surviving spouse has to take a required minimum distributions on inherited IRAs despite being in a higher tax bracket when filing as a single individual instead of jointly.

Protecting Your IRA from Medicaid

In Ohio, a single person must spend their assets down to $2,000 before being eligible for Medicaid help. Many Ohioans are surprised to learn that while IRAs may provide creditor protection, they are considered a resource that must be spent down to pay for long-term care costs.

At AlerStallings, we helps families protect their IRAs. We use coordinated strategies to detax the IRA account and then protect a portion of the detaxed amount in an asset protection trust. This disciplined approach means more of your money stays in your family.

If you have an IRA that you would like to protect, give us a call. We can help you determine the tax plan and type of trust that will be most beneficial for you and your family.