Typically, IRAs are “custodial” accounts with a beneficiary designation. At the owner’s death, the IRA proceeds go to the named beneficiary or beneficiaries with no strings attached. The beneficiary is free to handle the assets any way he or she pleases, without regard for tax consequences or the wishes of the IRA’s original owner. 

At Stifel, we know there are circumstances when an IRA owner would prefer to exercise more control over IRA assets. One way to do this is to name a trust as the primary or contingent IRA beneficiary. Another solution is to open a “trusteed IRA,” where the IRA is held by a trustee rather than a custodian. Unlike a custodian, a trustee can exercise discretion and control distributions.

Stifel takes a new and unique approach to trusteed IRAs with our Stifel Springing IRA, which provides you with maximum flexibility for your estate and retirement planning.

During your lifetime, for as long as you choose, the account exists as a standard traditional custodial IRA. You will continue to work directly with your trusted Stifel Financial Advisor to manage your account as long as you are alive, willing, and able. Upon your death, incapacitation, or election, the trust provisions within your account agreement spring to life and the account becomes a trusteed IRA. Stifel Trust will step in, assume full trustee responsibility, and carry out your directions.

With the Stifel Springing IRA, you can:

• Ensure access to IRA funds if needed during your incapacity
• Provide support for a surviving spouse before the assets pass to your children or grandchildren from a prior marriage
• Protect spendthrift heirs by limiting their control over distributions
• Provide for minor children, grandchildren, and/or special needs beneficiaries
• Protect IRA assets from a beneficiary’s creditors, spouse, or ex-spouse

Consult with your legal and tax advisors to determine how best to coordinate your IRA with the rest of your estate plan. If the Stifel Springing IRA is appropriate, contact your Stifel Financial Advisor for more information.

When setting up an IRA, many think of custodial Roth IRAs or traditional IRAs. But another option to consider is the trusteed IRA. A custodial IRA allows for the account owner to maintain full control of their assets, trading authority, and distributions during his or her lifetime. In a trusteed IRA, the asset allocation, trading, and distributions are controlled by a trustee (generally a financial institution) and must follow the terms of the trust agreement. That may be a beneficial attribute, depending on a number of different factors and goals for you and your family.

A trusteed IRA may offer a solution for individuals who want control over their retirement assets (even after passing) as part of their estate plan. When establishing a trusteed IRA, the account owner will sign a trust document creating trust provisions and designating beneficiaries of the trust. Since the trustee or financial institution acts on behalf of the trust document, this can control how and when distributions are paid out to beneficiaries. IRA owners may want to consider a trusteed IRA for estate planning purposes if their beneficiaries are:

• Minor children or grandchildren
• Special needs or disabled family members
• Part of a blended family or second marriage
• Spendthrifts (people who aren’t financially responsible)

If the goal is to exert control over the IRA assets after death, protect spendthrift heirs, and efficiently pass down wealth for the next generation by limiting their control of distributions, a trusteed IRA can make a lot of sense. In a custodial IRA, non-spouse beneficiaries would typically open their own inherited IRA after your passing and have the option to take a full distribution immediately. This could potentially create a significant tax consequence and limit additional years of tax-deferred growth. Custodial IRA owners may designate their own trust as the IRA beneficiary by drafting and maintaining a trust document with an attorney. However, this process can be rather complex and lead to additional estate planning expenses.

The IRA has certain provisions through bankruptcy protection and state laws to limit creditors’ access to retirement assets while you are alive. But, if you have a custodial IRA and pass away, creditors may go after inherited IRA assets. On the contrary, a trusteed IRA keeps those retirement assets protected from creditors. This is because the IRA assets are technically that of the trust, not the IRA holders or their beneficiaries.