Wednesday, July 16, 2014
As I have previously discussed, the Supreme Court ruled in Clark v. Rameker that inherited IRAs are not protected in bankruptcy because they are not retirement funds. In this new post-Clark world, the focus has become how to protect inherited retirement plans from creditors. The answer depends on who is inheriting the account, and here are common beneficiaries of inherited retirement accounts and what they can do:
- The spouse: Rollover the inherited account into their own retirement account.
- Anyone other than the spouse: Unfortunately the inherited account is not safe from creditors in the hands of a non-spouse, and the only clear solution is to pick another way to benefit the intended beneficiary.
- A retirement plan trust: An “accumulation trust” will provide annual payments to intended beneficiaries and provide the sought creditor protection.
See Marc Cusano, Retirement Plan Trusts Headline IRA Forecast, Wealth Management, July 15, 2014.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.