Kaplin Stewart

A generation-skipping estate planning strategy

No two Pennsylvania families will share the exact same set of needs and goals when it comes to making plans for their estates. Fortunately, there are a multitude of options available and a solution to suit virtually every scenario. One estate planning option that is often overlooked involves retirement trusts.

The appeal of a retirement trust is that it allows wealth to grow tax-free for a lengthy period of time. These trusts are funded with various retirement savings vehicles, and the trust itself becomes the technical owner of the assets once the trust is funded. With a retirement trust, the creator’s children agree to disclaim some or all of their inheritance in favor of passing those assets down to their own children.

When the account holder reaches the age of 70.5, required minimum distributions (RMDs) are triggered. Those distributions are small and will have a minimal impact on the value of the assets over time. Best of all, the account holder’s children can use their own retirement ages to trigger the RMD, which gives the assets even more time to grow.

In the end, assets placed in a retirement trust can exponentially grow in value from the time the trust is funded until the time the grandchildren receive those assets. This can be a great option for Pennsylvania families in which the middle generation is financially stable. For those who would like to learn more about this and other estate planning strategies, an appointment with an estate attorney is a great place to start.

Source: wealthmanagement.com, “Estate Planning for an Aging Population“, John M. Goralka, July 5, 2016