Pretty strong image…Pretty big problem. I guess you get the idea and you know I am right.
By: Thom L. Cooper
Certified Elder Law Attorney
Part 1: Definition of theProblem: IRA vs Catastrophic Illness:
We all stick our heads in the sand. Who wants to think about this? No one… but we must. This is one of the biggest problems we are now facing in working with our clients in the area of elder law.
When I first started my elder law practice the wealth pattern of WWII vet era seniors was a home, savings, investments and a significant defined benefit pension every month from their employer and… no IRAs or qualified plans . This wealth pattern has now changed as we move to our current retirees. Now most of retirees still have a home, but instead of savings and a substantial pension, they now have a significant IRA with a minimal pension and modest investments and savings … especially when compared to the size of their IRAs and qualified plans.
This is a very significant change from a planning perspective. While homes and non IRA type investments can usually be placed in trusts to protect them from being ravaged by a catastrophic illness, the IRAs and qualified plans can not be placed in trusts without devastating tax consequences. In addition, as everyone knows, any time you take funds from a qualified plan you pay significant tax. Finally most seniors feel that there IRAs are their “fall back money” to keep them from grocery shopping in the cat food aisle.
We believe the solution is the protection of the IRA by leveraged collateral funds with associated protected trusts.
What in the world does that mean? I will begin to explain in our next blog “Part 2 The IRA Protector Trusts: A Solution for the Problem of IRA vs Catastrophic Illness”
