Estate Planning Attorney Michael Gilfix Explains Inherited IRA Protection in Light Of Supreme Court Decision

Law Firm Newswire



Palo Alto, CA (Law Firm Newswire) November 18, 2014 – Earlier this year, the Supreme Court of the United States reaffirmed that inherited IRA accounts are not protected in bankruptcy as regular retirement accounts are.

According to estate planning attorney Michael Gilfix of Gilfix & La Poll, this is just one of the many reasons that anyone with a significant IRA account should look into the idea of setting up a trust as the beneficiary of an IRA account.

“Designating a trust for an IRA account is not for everyone,” Gilfix explained, “but it could be of great benefit to families with small children or with special needs family members and for anyone who simply wants to ensure that the money is protected.”

In the Supreme Court case, Heidi Heffron-Clark inherited an IRA account from her mother and declared bankruptcy several years later. Her attorneys tried to claim that creditors could not access the money in the IRA because it was a retirement account, but the Supreme Court disagreed, saying that inherited IRAs are fundamentally different.

According to an article in Forbes, a properly structured trust can still allow beneficiaries to stretch out the tax benefits of an IRA account over more years, as they might do with the account if they inherited it directly.

Gilfix pointed out that individuals should consult a financial planner and an attorney before making a decision. “Most people fill in a beneficiary name on a form when they open the IRA account, and they do not give much more thought to it,” said Gilfix. “This recent Supreme Court decision is a reminder that there are many good reasons to put more thought into how an IRA would be handled as part of an inheritance.”

The Supreme Court case is Clark vs. Rameker, Trustee, et al., case number 13-299.