A standalone retirement trust is a trust that can be revocable or irrevocable. It’s separate and apart from a revocable living trust. There are three main scenarios where somebody may want to consider a standalone retirement trust. The first is for asset protection purposes of beneficiaries. If you leave an IRA or a 401(k) to a beneficiary and simply name that beneficiary individually, that retirement account may not receive the benefit of asset protection that you think it will. However, by using a standalone retirement trust, there are some very significant barriers and protections that can be put in place to allow for that protection.
Secondly, if you have a beneficiary and you’re concerned about them perhaps liquidating the retirement assets too quickly, maybe that retirement asset not being there for, say, an adult child someday to see them through to retirement, a standalone retirement trust is a vehicle that can provide structure to an IRA that’s being passed onto a beneficiary.
A third scenario where a standalone retirement trust can be very helpful is where we have a high net worth client who already has a revocable living trust and we have a lot of different types of assets in that revocable living trust. By placing retirement assets only in this standalone retirement trust, it makes the job of administration much simpler down the road.