Protect Your Wealth!

by Peter Rizzo

Life Settlements in a Retirement Account? Think Again.

To those that have self-managed Retirement Plans and those that are considering one, a highly respected Self-directed IRA and Solo 401k Attorney has put together some out-of-the-box ideas for using a corporate structure as a beneficiary for your Solo 401k or Checkbook IRA.

Congratulations, just the mere fact that you use a self-directed IRA shows that you are willing to explore innovative approaches to wealth building and estate planning.

Let me share with you another wild, yet practical and legal strategy to consider:

Name a corporation as the beneficiary of your IRA.

While traditionally, IRA beneficiaries have been designated as individuals, nothing in the tax code says your IRA beneficiaries have to be individuals. Put on your creative thinking cap and think of the many possibilities.

  1. Trusted management. Let’s say the kids are a bit… lacking in financial maturity. You could name a trusted person as the president of the corporation and limit the kid’s ability to raid the funds for a wild time in Vegas.
  2. Lower tax brackets. Currently, the highest federal rate for a C-Corporation is 21%. For individuals it’s 37%.  On a $500,000 IRA, you could save $80,000 in taxes.
  3. Utilize deferred losses. The above example is if the corporation is making a profit. What if it’s a family corporation that has some net operating losses? Those losses might offset the IRA distribution. Just stop and think about it, there might be a way to not pay taxes on a traditional IRA distribution.
  4. No losses? Make some deductions.  Probably the easiest deduction would be retirement plan contributions.  This is a little over the top, but still might be effective for some people.  While some recent changes in the tax code eliminated the ability to stretch out distributions over life times, this could re-create the ability to stretch the distribution.
  5. Roth conversions. This is a really wild one.  What if the corporation that is named as a beneficiary is owned by the kid’s Roth IRA.  The distribution would flow into the corporation and be taxed at 21%.  Then the Roth could liquidate the corp.  Where do the assets end up?  In the Roth!

When it comes to securing your financial future and leaving a lasting legacy, considering a corporation as the beneficiary of your IRA can be a game-changer.  The tax efficiency and knowledge that there is a manager with financial sense, makes it a compelling option for individuals seeking to optimize their wealth transfer strategies.

Standard disclaimer: The beneficiary of your IRA is a complex financial decision; it is essential to consult with experienced professionals in estate planning and tax law to ensure your specific needs are met. By taking proactive steps and exploring the advantages of naming a corporation as your IRA beneficiary, you can maximize the benefits of this powerful tool and provide your loved ones with lasting financial security that should bring a smile to their face.


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    1 Comment

    1. Byron

      Interesting idea. Definitively something to keep in mind.