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Guardian Ira Basics In Texas

On Behalf of | Sep 30, 2022 | Estate Planning, Probate & Guardianships

An IRA is not just a sound retirement plan for people when they leave work; a person can also use it as an estate planning tool for their loved ones in Texas. Basically, the child provided for will own the account, but their parent or adult custodian will manage it for them until they come of age.

Guardian IRA Definition

Also known as a custodian IRA, a guardian IRA is an account set up for a minor child with the intention of providing financial security in the event of the death of a parent. It can also be established for a disabled individual, family member or adult who is poor at managing finances on their own.

How A Guardian Ira Work

A guardian IRA works much like a regular IRA, except that it is established for someone else, usually a minor. The account is funded with money from the custodian’s (parent, grandparent, legal guardian or other adult) own IRA, contributed yearly after tax.

When your child turns 18, the account will be turned over to them, and they can begin withdrawing funds. If you die before your child turns 18, the money in the account will be used to provide for their needs as determined by the custodian of the account.

Benefits Of A Guardian Ira

Generally, estate planning, probate & guardianships work to provide financial security for your loved ones in case something happens to you. Therefore, you can rest assured that your child’s education, health and wellbeing will be taken care of in the event of your death.

A guardian IRA also has the added benefit of being a tax-deferred account, meaning that the money you contribute to it can grow over time without being taxed. More importantly, it is not subject to the probate process. Your child won’t have to wait for years or deal with the complexities of probate to access the funds in their account.

Overall, a guardian IRA can be a great way to provide financial security for your children. However, it’s not void of drawbacks. It’s important to weigh the pros and cons of a guardian IRA before deciding whether or not it’s suitable for you and your family.