U.S. Supreme Court Rules on Inherited IRAs and Creditor Rights

The U.S. Supreme Court held in Clark v. Rameker that inherited IRAs are not protected from creditors in the event of bankruptcy. (Pre-death, the IRA would have been protected.)  Use of an IRA trust may be a means of protecting assets from creditors.  This is so because creditors can only access what an individual can access.  A trust is a essentially a relationship with respect to property, and a trust (ordinarily) can be the death beneficiary of an IRA.  The IRA can pay an income stream over a period of years to the trust, and the trust can be drafted to hold its assets or distribute them.  The minimum distribution requirements of Internal Revenue Code section 401(a)(9) must be met with respect to the IRA’s assets.