Back in June I discussed the implications of the Supreme Court’s decision in Clark v. Rameker (prior post) regarding an IRA. In Clark the Court said that there is no protection from creditors for Inherited IRAs. Seems now many people and advisors are scrambling to implement ways to project these assets. Remember we are not talking about your IRA into which you have put money, nor are we talking about a spousal roll-over after the death of the first spouse – IRA assets in both scenario’s are still protected because the funds in those IRAs were set aside for retirement purposes. However, when a child, grandchild or other individual is a beneficiary of an IRA, the law today will not protect IRA funds from their creditors, divorcing spouses or in bankruptcy. There are two main ways to obtain creditor protection: one is a Trusteed IRA, however, not many institutions offer them; the other way is with a trust. Such a trust is commonly referred to as a “See-through Trust” or a “Conduit Trust.” These trusts can be included in a Will or created independent of your Will. Either way, if properly drafted this type of trust can protect a beneficiary’s inheritance. And, given so many individuals have large amounts of retirement assets in IRAs, this may be a wise move for many people.
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