Advanced Planning Strategies

Estate tax-driven planning is going to be less frequent as estate tax credits rise under current and, most likely, future legislation. Planners should equip themselves with additional tools to meet the needs of clients who do not have a current need for estate tax motivated planning. For IRA account holders, there are a number of creative approaches that will provide a more effective solution than an outright transfer of the IRA account to beneficiaries at death. One of those solutions is the purchase of an immediate annuity inside the IRA account in conjunction with the purchase of a life insurance policy held by a life insurance trust. A variation of the IRA annuitization strategy can work for a conservative client with low risk tolerance who is interested in investing cash. A properly drafted stand-alone irrevocable IRA trust can provide the same income tax deferral as if the IRA were left directly to the beneficiary individually, while also maintaining the asset protection and investment protection that can be provided with an inheritance in trust. Beneficiary-directed trusts are a convenient planning solution for the Baby Boomer generation client that expects to receive a modest-to-significant inheritance, or simply wants an asset protected inheritance, but doesn't want to trouble his or her parents with an explanation of the benefits of receiving an inheritance in trust rather than outright.