Inherited IRAs & Court Cases
Our Firm is beginning to work with an attorney who handles litigation. He would like to see court rulings where the court said Inherited IRA assets were not creditor protected & the judge declared the Inherited IRA to be distributed to help settle a lawsuit/ judgment/ lien, etc. We have been working with another attorney who includes retirement benefits trusts (RBT) to hold Inherited IRA assets to give the creditor protection to the assets. The new attorney likes the planning using the RBT, but wants to see if he can understand in what situations the courts ordered Inherited IRA’s to be invaded to settle claims. Are you able to help with referring us to some court cases? The more recent the better I would think. Thank you, Ed
Permalink Submitted by Bruce Steiner on Thu, 2013-10-31 18:35
The cases have gone both ways on this. The lawyer should be able to find them. If he/she can’t find them, you might want to consider working with a lawyer who can. Except for spouses (where if you leave the IRA outright, the spouse can roll it over), we have our clients provide for their children in separarte trusts rather than outright, to keep the inheritance out of the child’s estate, and to protect against creditors and spouses. The same reasons apply to IRAs as to other assets. There are some special requirements for trusts that receive IRA benefits. However, you can include these trusts in the Will. We do this routinely (except where the IRA is too small to warrant doing so).
Permalink Submitted by Alan - IRA critic on Thu, 2013-10-31 19:57
Here is an article that may be helpful: http://www.ncestateplanningblog.com/07/20/articles/iras/inherited-ira-not-creditor-protected/