Alexandria, VA Estate Planning Blog

Monday, November 1, 2010

Merrill Lynch Trusteed IRA: An Estate Planner’s Critique


Please note that the following is an opinion only. Like all the information on our website, it isn't legal advice. Admittedly, it is based on a very limited understanding of the Merrill Lynch Trusteed IRA. With that, the following represents an incomplete and intrinsically unreliable generalized analysis of the Estate Planning implications of the Merrill Lynch Trusteed IRA. If you have any questions, contact our firm or your local Merrill Lynch representative.



It appears that the Merrill Lynch Trusteed IRA's most appealing feature is realized when used in conjunction with a separate retirement plan trust and a tailored power of attorney. Together they could provide substantial multi-level fraud protection to limit the risk of caretaker fraud during incapacity. The superior asset protection of a standalone accumulation retirement plan trust can be combined with the professional management of the Merrill Lynch Trusteed IRA. The Merrill Lynch Trusteed IRA's limited asset protection component may serve as a last level of asset defense in case of Trust Piercing. Finally, Merrill Lynch Trust Company's responsibilities may grant the client more flexibility to choose a Trustee based upon their projected ability to satisfy the desired discretionary distributional scheme (as opposed to financial acumen).

Potential Savings:

(A) The conduit distribution option could allow the client to realize basic asset protection without incurring legal fees associated with having an attorney draft a trust with conduit provisions for retirement benefits.

(B) As a self-sustaining retirement account for which the Merrill Lynch Trust Company allegedly assumes responsibility for the RMDs.


(A) The incapacity protection promoted by the TIRA could easily and inexpensively be dramatically strengthened by a properly drafted narrowly-tailored Power-of-Attorney and other asset protection Trust provisions.

(B) It doesn’t appear to be a very effective planning tool for blended families. In fact, its promoted effect depends on the surviving spouse failing to survive to their projected life expectancy. Using the Merrill Lynch Trusteed IRA option for blended families may be similar to driving a large square-peg through a smaller circular-whole. In some circumstances, it may be better to pass other assets to a trust with Blended Family Provisions (that doesn’t permit principal distributions) and allow the spouse to inherit part or all of the Merrill Lynch Trusteed IRA so that the surviving spouse can roll over the plan into their own account (allowing for greater stretch planning options).



Planning note: Retirement benefits may be funded into a living trust without compromising the stretch tax benefit. In fact, doing so can provide great asset protection benefits for your loved ones. If you are interested in living trust planning with retirement benefits, give us a call. 

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