Leaving your IRA to a loved one? Re...

Author: Wolfe Ossa lawCategories: Elder Law

In the Clark v. Rameker case, the Supreme Court found that an Inherited IRA was not a protected retirement account because the beneficiary was pulling money out prior to retirement age. When an IRA is inherited, the beneficiary is forced to withdraw money if the decedent had been withdrawing before passing. This is mandated by the US Tax Code. In the Clark case, the Clark’s filed for bankruptcy and creditors were allowed access to the IRA Mrs. Clark had inherited.

Typically an IRA holder may not withdraw from the account without penalty prior to reaching a certain age. Because here, Mrs. Clark was withdrawing money prior to that age, the Court found that the account did not qualify as a retirement account. The Court did not consider this a proper use of a retirement account.

If your IRA is Payable on Death (POD) to a loved one, their interests may not be protected. It is extremely important to plan ahead in these cases. Rather than paying the money out directly to your loved one, you would be better off paying them through a trust. The trust would help to ensure that once you pass away, everything that you’ve worked for isn’t lost.

We would be happy to guide you through the process of designing a trust or trusts that not only protect your assets today, but also in the future, for yourself and your children.

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