Protect Your IRA Assets From Creditors – Set Up a Trust to Prevent Creditors From Being Able to Go After It in Probate

Individualized Retirement Plans are exceeding popular right now for a numberof reasons, often called IRAs , a growing size of the American population is using these as retirement planning vehicles. Its not something that we like to talk about but what happens to your IRA if you die prematurely? The answer depends on who you name as the beneficiary, so be careful. You may have been told, don’t worry about your IRA it is protected because Florida has statutory protections for IRAs. If that’s the case you may have misunderstood or been mislead. While Florida does have statutory protection for inherited IRA’s, this protection only applies if your beneficiaries are residents of Florida at the time of your death.

The simplest way to protect your IRA is to transfer it to a properly designed trust that will protect it from creditors in the event of untimely death.

• In June of last year, the US Supreme Court in Clark V Rameker stated that children or other “non-spouse” individuals who inherit are at risk of loss to their creditors.
• This was not a close call, it was a 9-0 decision and clarifies that an inherited IRA is not protected from the creditors of its owners.
• While a spouse can be named, the spouse has a unique option that other beneficiaries do not have. The spouse can do a rollover IRA. This protection does not help one who dies without a spouse or has serious risks if the surviving spouse is in need of long-term care.
• If a spouse was to maintain the decedent’s IRA status and draw out funds over the life expectancy of the decedent, the IRA would not be protected as a Roll over IRA or a new IRA.

In the past, most financial professionals would object to naming a trust as a beneficiary, you may now start to see them realize the benefit as they become aware of the new risks to the beneficiaries that they did not foresee. They also did not understand that it is possible to create a trust where the stretch out provisions are not lost. To maintain the stretch out provisions in an inherited IRA where a trust is a beneficiary, the trust must be what is called a qualified beneficiary. For a trust to be a qualified pass thru beneficiary of an IRA, it must meet all 4 criteria:

1.  The trust must be valid under state law;
2. The trust must have identifiable “human” beneficiaries;
3. The Trust must be irrevocable after the death of the settlor;
4. A true copy of the plan document must be provided to the plan administrator

There is no point or benefit to risking your IRA assets by leaving them to an individual. A properly designed trust, set up by a Florida Probate Attorney, can alleviate these concerns in your estate planning.