Trusteed IRAs - Merrill Lynch

Trusteed IRAs
Integrate and simplify your retirement and estate plans
Trusteed IRAs from Merrill Lynch Trust Company
To create the legacy of your dreams, you may need more
than an Individual Retirement Account and a will. That’s why
Merrill Lynch Trust Company* (MLTC) created Trusteed
Traditional and Trusteed Roth IRAs. They allow you to preserve
the tax advantages of your retirement assets for as long
as possible while providing maximum control over how the
assets are passed on to future generations.
A substantial portfolio of tax-advantaged retirement assets
can do more than help to provide financial security for you at
retirement. Properly structured and managed, your retirement
assets may be able to provide a legacy that can have a lasting
effect on your family.
Trusteed IRAs accomplish all this through a single account that
combines an IRA and a trust. And it offers you the important
assurance that assets can be professionally managed and
invested on a fiduciary basis by Merrill Lynch Trust Company.
They are IRS-approved solutions that provide flexibility and
security that can be difficult to achieve any other way. Few
companies offer this type of estate planning solution.
This brief guide outlines the benefits of Trusteed IRAs and
explains how you can use them to help meet family and
financial objectives that extend generations into the future.
* Merrill Lynch Trust Company is a division of Bank of America, N.A.
Merrill Lynch Wealth Management makes available products and services offered by Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”), a registered
broker-dealer and member SIPC, and other subsidiaries of Bank of America Corporation (“BAC”).
Trust and fiduciary services are provided by Merrill Lynch Trust Company, a division of Bank of America, N.A., member FDIC, a wholly owned subsidiary of BAC.
Investment Products:
Are Not FDIC Insured
Are Not Bank Guaranteed
May Lose Value
MLPF&S and Bank of America, N.A., make available investment products sponsored, managed, distributed or provided by companies that are affiliates of BAC or in
which BAC has a substantial economic interest, including BofATM Global Capital Management.
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Trusteed IRAs
Trusteed Traditional and Trusteed Roth IRAs combine the tax
advantages of an IRA with the flexibility and control of a trust—
all in a single document. The result is a powerful planning tool
that delivers the benefits of either tax-deferred or tax-free asset
accumulation along with the ability to control how, when and in
what amounts your IRA assets are distributed to your heirs—
while satisfying applicable federal tax law.
You may find a Trusteed IRA especially valuable if you:
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eek control over who receives IRA assets, in what amounts
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and when
Are concerned about IRA management in the event of incapacity
ant to extend the tax-deferral of a traditional IRA or any
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tax-free earnings accumulation of a Roth IRA to benefit children,
grandchildren or other heirs
ave remarried and want to provide for a current spouse and
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children from a previous marriage
ant to preserve continuity of IRA management during lifetime
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and after death
re concerned about the financial discipline or sophistication
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of heirs
Have a non-U.S. citizen spouse
The Trusteed IRA structure allows you to meet all of these needs
and others as well.
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Trusteed IRAs:
Unique and powerful planning tools
Ensure security in the event of incapacity
Help to maximize estate tax savings
If you become incapacitated and are not able to
manage your financial affairs, you would be unable
to personally instruct the custodian of your IRA on
investing your account, making required minimum
distributions (RMDs)—or even using funds to
support you. With a custodial IRA, the only way
your family may access assets is through a Durable
Power of Attorney with appropriate provisions that
you must sign in advance—or by having a guardian
appointed by a court. With a Trusteed IRA, MLTC,
acting as trustee with investment discretion, can
invest your IRA assets, ensure RMDs are made, pay
bills as appropriate, and address other needs.
Sound estate planning provides financial security
to your heirs in the most tax-efficient way. One
Trusteed IRA payout option allows your surviving
spouse to minimize your combined taxes by
disclaiming all or a portion of your IRA in order to
take advantage of any unused portion of your estate
tax exemption. Your spouse will still receive income
from the disclaimed IRA assets, but the assets in the
disclaimed IRA do not become part of your spouse’s
estate. As a result, upon your spouse’s death, they
pass to the beneficiaries you designate free from
federal estate tax.
Provide for your current spouse and the
children of a previous marriage
“Stretch” IRA benefits
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A Trusteed IRA may be ideal if you have a
substantial IRA, or are thinking about rolling over
401(k) or other qualified retirement plan assets into
an IRA. Trusteed IRAs enable you to preserve the
unique tax advantages of these assets and pass them
on to succeeding generations. With most IRAs, your
original beneficiary may withdraw any amount, for
any reason, at any time—potentially jeopardizing the
goal of extending tax benefits for future generations.
With a Trusteed IRA you can regulate distributions
over the lifetime of your beneficiary and even split it
into separate accounts for individual beneficiaries,
with different distribution standards for each.
Trusteed IRAs allow you to arrange for your spouse
to receive income for life, and also give MLTC, as
trustee, discretion to use the IRA principal for his
or her benefit. Upon the death of your spouse, the
IRA can be split into shares for your children and
grandchildren as you have designated.
Provide for a spouse who is not a U.S. citizen
A spouse who is not a U.S. citizen does not qualify
for the unlimited marital deduction, so estate tax
may be payable upon your death. Trusteed IRAs can
be structured to avoid estate taxes on assets passed
to a non-U.S. citizen surviving spouse until the
principal is distributed.
If the amount of the RMD is insufficient, you
can authorize MLTC, at its discretion, to pay out
additional sums for your beneficiary’s health,
education, maintenance and support. You can allow
beneficiaries to choose their own beneficiaries or
designate successor beneficiaries yourself so you can
control who will have access to your assets.
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The “Stretch” IRA is not a type of IRA, but rather a technique to extend the assets of an IRA beyond your lifetime, possibly to multiple generations.
The stretch IRA strategy is designed for individuals who will not need to use assets during retirement. It is helpful to consult your tax and financial
advisor(s) to assist you in determining whether a stretch IRA strategy can help you to enhance your retirement and estate plans.
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Trusteed IRA solutions
Your retirement assets may become a significant part of your legacy. Just as you have important plans for
other assets in your estate, you may also have specific goals for your IRA, 401(k) or other qualified plan
assets. Before the introduction of Trusteed IRAs, the most common way to ensure these goals were met was
to establish a trust and designate it as beneficiary of your custodial IRA or qualified retirement plan. MLTC
Trusteed IRAs have provided many clients with a simpler option: a streamlined and efficient way to help
meet estate planning objectives by combining your IRA and a trust in a single account.
My goal for my IRA is to:
MLTC Trusteed IRA solution:
Help provide financial security and
professional management of my IRA
in the event of my incapacity or that
of my heirs
In the event of your incapacity, MLTC can continue to provide professional
investment management, pay bills, make any RMDs and provide for your
loved ones, all within the Trusteed IRA. We can also work with an agent
under a properly drafted Power of Attorney. If you have neither, your IRA
assets can only be accessed through a court’s involvement.
Implement a “Stretch” IRA to extend
tax advantages for generations and
benefit my intended heirs
MLTC can make the stretch under the terms you specify, so IRA assets have
the opportunity for continued tax-deferred or tax-free growth, depending on
the type of IRA. For IRAs outside a trust, your heirs may withdraw the entire
IRA—defeating your plan to provide them with an income stream for life and
extend potential tax-advantaged growth.
Control who receives IRA assets,
in what amounts and when
A Trusteed IRA allows you to customize who receives your IRA assets,
in what amounts and when. This can help you care for heirs you want
to support, in the way you specify. It allows much more flexibility,
customization and control than a traditional IRA.
Transfer IRA assets at death
efficiently and consistent with my
overall estate plan
Trusteed IRAs are an IRA and a trust in one account. They can eliminate the
cost and complexity of separate IRA and trust accounts often used when
planning for IRAs.
Find a trustee to integrate my IRA
with a trust I have already created
MLTC can work with attorney-drafted trust documents to implement estate
planning with IRAs.
Reduce estate taxes
Selections on the beneficiary designation forms may enable you to reduce
federal estate tax while providing for your intended beneficiaries in the
manner you direct.
Retain the tax benefits of my
qualified plan and pass them
on to heirs
The Trusteed IRA accepts rollovers from 401(k), 403(b) and other qualified
plans, as well as IRAs, Keogh, SEP and other retirement vehicles.
Assure that at the death of my
beneficiaries, remaining assets
pass as I intend
Trusteed IRAs allow you to direct how and to whom remaining assets pass
at the death of a beneficiary.
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Trusteed Traditional IRA or Trusteed Roth IRA?
To help clients take advantage of the tax benefits
of a Roth IRA, MLTC offers both a Trusteed
Traditional and a Trusteed Roth IRA. You may find
it advantageous to roll your IRA, 401(k) or other
qualified plan asset into a Trusteed Roth rather than
a Trusteed Traditional IRA.
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Tax consequences of converting
Income tax
Typically, Roth IRA conversions require you
to pay income tax on any of the rollover-eligible
pre-tax assets converted, with such tax due in the
year of conversion. You should always consult a tax
professional prior to taking any distributions from
your retirement savings or converting funds to a
Trusteed Roth IRA.
What are the advantages of a
Trusteed Roth IRA?
A Trusteed Roth IRA offers:
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ederal (and possibly state) income tax-free
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accumulation of earnings
Estate tax
MDs need not be made during the original
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owner’s lifetime, enabling funds to stay in the
account potentially accumulating earnings on
a tax-free basis.
As with a traditional IRA, the value of the Roth IRA
will be included in your gross estate for federal
estate-tax purposes. However, the amount of income
tax paid on the conversion will reduce the size of
your gross estate, which could result in federal
estate-tax savings if your estate is large enough to be
subject to estate tax.
The potential to help minimize estate taxes
Should you consider a Trusteed Roth IRA?
In general, a conversion to a Trusteed Roth IRA
could be beneficial if you:
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ay be in the same or a higher tax bracket when
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you retire
on’t expect to need the IRA assets to fund your
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retirement and could benefit from income tax-free
accumulation of earnings
ish to leave assets to children and other heirs
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income tax free
ave the resources to pay income taxes on the
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conversion from non-IRA assets
Wish to reduce the taxable value of your estate
xpect the value of IRA assets to appreciate
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substantially in the future
or a withdrawal from a Roth IRA to be federal income tax free, it must be considered qualified. There is a five-year holding period when determining
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whether earnings can be withdrawn tax-free as part of a qualified distribution from a Roth IRA. This period begins January 1 of the tax year of the first
contribution or the year of conversion to any Roth IRA. The distribution must be made after the five-year holding period, and the individual must have
reached age 59½, be deceased, disabled or use the funds for a first-time home purchase (lifetime limit of $10,000). There is a 10% additional federal tax
(in addition to ordinary income tax) for nonqualified withdrawals of earnings taken before age 59½, unless an exception defined by the Internal Revenue
Code applies. A special provision applies for converted assets. If a nonqualified withdrawal is made within five years of the conversion, the earnings
withdrawn will be subject to income tax, and the entire withdrawal may be subject to a 10% additional federal tax unless an exception applies.
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Creating a Trusteed IRA
Your Merrill Lynch Financial Advisor can:
Working with your attorney and other advisors
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Explain the features of Trusteed IRAs
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Help you evaluate options
Your Financial Advisor can complement the existing
relationship you have with your attorney, accountant
and other professionals. Together they can help you
achieve all the planning benefits of a Trusteed IRA.
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raw on the expertise of a Trust Specialist to
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address your needs
You can establish your Trusteed IRA as easily as
opening a rollover IRA. Your Trusteed IRA can also
receive rollover distributions from your 401(k) or
other qualified retirement plans when you retire or
change jobs.
Delivering expert trust services and
investment management strength
Merrill Lynch is a leading provider of trust and
investment services. In addition, Merrill Lynch
Trust Company is part of one of the nation’s largest
and most experienced corporate fiduciaries. You
will benefit from the personal service of a local
professional, your Merrill Lynch Financial Advisor,
as well as specialized experience in administering
Trusteed IRAs. In addition to Trusteed IRAs, our
experience spans the full range of personal and
charitable trusts.
Merrill Lynch Trust Company provides flexible and
sophisticated strategies for investment management
that leverage the capabilities of Merrill Lynch and
those of independent money managers. Our
open-architecture platform of fiduciary investment
alternatives provides you with access to the full
spectrum of asset classes and investment styles
to address your investment objectives.
For more information
To find out how you can take advantage of Trusteed IRAs, contact your Merrill Lynch Financial Advisor
who will partner with a team of Trust Specialists. They will bring together the resources of the
Merrill Lynch Trust Company to help you achieve your long-term goals for your retirement assets.
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Any tax statements contained herein were not intended or written to be used, and cannot be used for the purpose of
avoiding U.S. federal, state or local tax penalties. Neither Merrill Lynch nor its Financial Advisors provide tax, accounting or
legal advice. Clients should review any planned financial transactions or arrangements that may have tax, accounting or
legal implications with their personal professional advisors.
Merrill Lynch, Pierce, Fenner & Smith Incorporated offers a broad range of brokerage, investment advisory (including financial planning), banking, trust, mortgage and
other financial services and products. The nature and degree of advice and assistance provided, the fees charged, and client rights and Merrill Lynch’s obligations will
differ among these services.
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