Blog   Tagged ‘IRA’

Individual retirement trust: a new way to save for retirement

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An individual retirement trust allows you to maintain the tax advantages that come with saving and investing in an individual retirement account (IRA), while providing you with the long-term control of a trust. You may be familiar with the uses and benefits of an IRA, and you may have a good understanding of trusts, but this unique solution can be the best of both worlds.

Individual retirement trust: a new way to save for retirement

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The basics

An IRA, whether Roth or traditional, is a savings mechanism that allows you to invest funds for your future retirement. The sooner you begin putting money into an IRA, the more time your money has to grow before you reach 70½, the age at which you are required to begin taking distributions from the account. IRAs prepare you for retirement and provide tax advantages, allowing you to choose whether to make contributions tax-free (traditional) or receive your distributions tax-free (Roth).

A trust is an estate planning tool that allows you to set aside funds for specific beneficiaries to receive when you pass away. Trusts can be managed by a third party called a trustee. The trustee handles management of the trust, including things like managing trust investments, making distributions to beneficiaries and taking care of trust assets, both during your lifetime and after your death.

An individual retirement trust combines the tax advantages of an IRA with the long-term control of a trust. This type of account allows you to save for retirement while maximizing tax advantages and ensures your IRA funds are distributed according to your wishes. Simply select your beneficiaries—whether people, organizations or charities—and the percentage of funds each beneficiary should receive, plus any conditions you have in mind. Once you have selected beneficiaries and determined percentages of distribution, the trustee oversees all of the distributions, including adjustments you may direct over time.

Using an individual retirement trust allows you to bypass the complicated IRS requirements involved in naming a trust as an IRA beneficiary, which is an alternative option. The trust portion of the account also helps protect your legacy from asset seizure by the potential creditors of your beneficiaries. If your heirs inherit your IRA assets without the protection of a trust, funds can be taken by a beneficiary’s creditors in the event of a beneficiary’s bankruptcy.

Also, individual retirement trusts can be set up with disability provisions that ensure your accounts are maintained in the event of your illness or long-term incapacitation. In this case, the trustee will take over the management of your retirement fund investments, coordinate bill pay and administer distributions as set forth in the document—all without the need for a separate guardian or conservator.

Who can benefit from an individual retirement trust?

Individual retirement trusts offer a unique structure that may not work for everyone. Most importantly, this structure is best for those who already have significant retirement assets and are concerned about the future management of those assets.

If you are particularly tax-sensitive, you may benefit from an individual retirement trust because it allows you to maximize the tax deferment available through the stretch payout option, whether the IRA is a traditional or Roth account.

If you have divorced and remarried, this solution can help you streamline the inheritance process by allowing you to select a variety of beneficiaries with varying inheritance percentages. Step-children can be included, as can organizations of your choice. For blended families, individual retirement trusts are beneficial in that they provide extensive control over the distribution of assets. Specifically, beneficiary designations will not be changeable, even after your passing, which ensures the heirs you have chosen are provided with exactly what you have determined for them regardless of later marriages or life changes.

Individual retirement trusts are also good vehicles for those concerned with the use of the funds by heirs and seek to include limitations. Any amount set aside for a beneficiary that is more than the required minimum distribution (RMD) can be subject to the trustee’s discretion.

Bottom line:

An individual retirement trust can help you achieve the tax advantages of an individual retirement account paired with a comprehensive asset management plan for your heirs–now and in the future. You will be able to build and customize your legacy with multiple beneficiaries, long-term control and detailed asset distribution options. Combining an IRA with a trust can streamline your legacy administration and simplify the process in one efficient document.

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.

Mr. Conley is a vice president and legal counsel for UMB Private Wealth Management. He is responsible for reviewing estate planning documents and working with attorneys, clients, trust and bank associates regarding various legal issues that arise in the creation of trusts and estates. He joined UMB Private Wealth Management in 2000. Mr. Conley is an attorney and Certified Public Accountant. He is licensed to practice law in Kansas and Iowa.

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Don’t let tax credits fall through the cracks

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How can you get a bigger refund when filing your taxes? These tips can help:
tax credit tips
Even if you’re dreading the process of filing your taxes this year, taking the time to know what you’re doing can equal a bigger refund check. Everything from plugging in your electric car to adopting a child can be considered for deductions, so don’t miss out on refunds this year.

The IRS offers several federal tax credit options designed to lessen the burden of taxpayers. This is especially true for low- and middle-income households, which often retain a higher percentage of their annual salaries for basic living expenses than high-income households.

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Earn tax deductions with a retirement plan
Some of the best tax deductions tend to be linked to retirement plans. With these deductions, you save money on annual taxes and invest in your future.

The Saver’s Tax Credit (previously known as the Retirement Savings Contributions Credit) is for those making eligible contributions to a 401(k), IRA, or other workplace retirement plans such as a 403(b), 457, or Thrift Savings Plan. If you’re contributing and are in a lower-income bracket, you can receive a tax credit up to $1,000 when filing alone and up to $2,000 if filing jointly.  This credit is on top of the tax advantages already associated with retirement plans, which might include pre-tax contributions, tax-deferred growth, or tax-free withdrawals in retirement.

Tax credits for small business owners
The IRS also offers potential tax credits for small business owners. One of the biggest deductions is through a home office credit.

More than 50 percent of U.S. small businesses operate at an owner’s home, according to the Small Business Administration(SBA). Unfortunately, many fear taking advantage of this tax credit will red flag an audit from the IRS. The good news is, that fear is usually unfounded.

To be eligible for a home office tax deduction, the IRS requires a portion of a residential property to be considered a legitimate home office. The home must be a primary workplace. If there is an additional office used, you cannot file a home office deduction. An exception can sometimes be made for those who work all day at an office part of the week and all day at home the rest of the week.

To figure out a home office credit, the SBA recommends calculating deductions by comparing the size of the home office versus the rest of the home. However, a business owner can also deduct expenses for a separate freestanding structure, which means a business owner can use a studio to conduct work, or a garage or barn for storage. But those freestanding structures should be exclusively for business.

Tax refunds as a way to save
Remember that getting a large refund may not always be in your best interest. It could be a sign that you’re having too much money withheld from your wages. If you have trouble saving on a regular basis, however, forced savings through tax withholdings is better than not saving at all. Just try to set aside all or a portion of your refund for the future. Some great ways to use your refund include paying down high-interest debt, building an emergency fund and investing for retirement.


Take a look at the IRS website for a comprehensive list of deductions, and ask a trusted tax accountant for advice on which ones apply to your situation so you can take full advantage of your options.


*This post is not meant to replace the advice of a tax professional.

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.

Mr. Chen is a Vice President and Portfolio Manager for UMB Private Wealth Management. He is responsible for all aspects of portfolio construction, including asset allocation, security selection and mutual fund analysis for high-net-worth clients. He joined UMB in 2013 and has 10 years of experience in the financial services industry. Mr. Chen earned a Bachelor of Science in Business with an emphasis in Financial Management from Kansas State University and Master of Science in Business with a Finance Concentration from the University of Kansas. He serves on the board of directors for the Financial Planning Association of Greater Kansas City and the Kansas City CFA Society. He is a Certified Financial Planner® and is a CFA charterholder.

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How to generate income during retirement

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Senior Couple WalkingWith the baby boomer generation already in or quickly approaching retirement age, it is important for current and soon-to-be retirees to determine the best approach to collecting the money from their 401(k), IRA, Roth IRA, pension plan, 403(b)  or social security.

You don’t want to spend your retirement years worrying about money. You should spend the time enjoying your family and hobbies or traveling! Planning ahead and working with a professional can help alleviate your anxiety.

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Here are some important things to remember about saving and spending during retirement:

  • Generate income using assets and investments

    Discuss with your financial planner how to generate income during retirement with the money you’ve set aside for this time in your life. Your planner can help you separate your assets into three groups: taxable, tax-favored and tax-free. If you take a blended approach to meeting your required minimum distributions, your money can last significantly longer.

  • Diversify your portfolio

    It is always recommended to have a portfolio of assorted investments. You don’t necessarily have to rely completely on safe, income-producing investments. Adjust your rate to your needs when necessary and don’t be afraid to spend capital from your retirement portfolio. Traditional IRAs, 401(k)s, 403(b)s, and self-employed plans are structured for you to withdraw from it over your lifetime. You might be nervous spending down these accounts, but a financial advisor can help you distribute these funds appropriately over the course of your retirement so that you can live comfortably.

  • Remember: taxes, timing, spending

    These three items are the most important factors to creating income during your retirement. You should understand your tax obligations because tax rates could help determine acceptable savings withdrawals.It’s also important to carefully time your retirement. The point at which you begin taking money from your retirement accounts can make a significant difference in the amount that is available several years into your retirement. Remember that some retirement funds charge a penalty if you withdraw before a certain age.Finally, it’s vital to spend wisely during this time in your life to ensure that you will have enough funds to last throughout your retirement. Do you want to splurge on a Hawaiian vacation during your retirement? If so, this is something you should plan for in advance. Talk to your advisor about any major spending you would like to do in your retirement. You might not be on a completely fixed income, but you need to be mindful of how much money you have to spend.

  • Educate

    Take the time to educate yourself before and during your retirement. Start planning early so you can enjoy this time in your life. Do your best to educate your children about saving for retirement and encourage them to start saving at an early age.


When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.

UMB Financial Corporation (Nasdaq: UMBF) is a diversified financial holding company headquartered in Kansas City, Mo., offering complete banking services, payment solutions, asset servicing and institutional investment management to customers. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas, as well as two national specialty-lending businesses. Subsidiaries of the holding company include companies that offer services to mutual funds and alternative-investment entities and registered investment advisors that offer equity and fixed income strategies to institutions and individual investors.

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