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McCurrie McCurrie
& McCurrie, L.L.C.

680 Kearny Avenue
Kearny, NJ 07032-3010
Phone: (201) 467-4180
Fax: (201) 997-9567
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Setting Up a Trust to Protect Retirement Savings, Part Two

Trusts have emerged as a popular option for parents looking to protect retirement savings from children with loose wallets. Instead of going straight to the child in question, money is funneled directly into a trust, which has the child named as its beneficiary.

The biggest upside for parents considering this sort of trust is the fact that it allows for money to be distributed annually, in chunks, to children. However, if you have more than one child, you may run into a common problem involving distribution and life expectancy.

For example, say you have a 30-year-old child from an early marriage and a 15-year-old from a second marriage many years later. If you would like to create a trust that pays out to both children, you will be forced to set up a payment schedule that accounts for the life expectancy of your eldest child.

This might be gotten around via so-called "conduit" trusts, which can be set up for each child individually. Each year, IRA payouts may be distributed to these trusts and then paid out to the designated child.

A modification caveat can also by affixed to theses conduit trusts, allowing the parent to modify the trust terms if needed due to changes in circumstance.

Another problem for some is the IRS's refusal, thus far, to be flexible in clarifying the beneficiary of a trust. As pointed out in recent article from The Wall Street Journal, this means that those setting up a trust have to get it right the first time - at least for now.

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