Loss of Creditor Rights Protection of Decedent's IRA in State Court

• Author: Seymour Goldberg
• Profession: Senior partner in the law firm of Goldberg & Goldberg, P.C., Woodbury, New York
• Pages: 149-151

149

LOSS OF CREDITOR

RIGHTS PROTECTION

OF DECEDENT’S IRA IN

STATE COURT

*Commerce Bank v. Bolander

2007 WL 1041760

(Kan. App., 2007)

(Selected portions of the opinion are provided below)

In the Commerce Bank v. Bolander case, Wanda executed a trust where she

was the beneficiary of the trust during her lifetime and reserved the right

to amend or revoke the trust at any time. The purpose of the trust was to

provide for the educational expenses of her lineal descendants.

When Wanda died, her two IRAs were payable to her trust. The

IRAs total value at the time of her death was $212,545.80.

Commerce Bank sought a monetary judgment against her estate and

the trust. The bank claimed that the trust property was subject to the

bank’s claim. The trustee argued that the bank could not attach the trust

assets.

It is undisputed that the trust was clearly a revocable trust. The

trustee claims that the trust became irrevocable after Wanda’s death and

that the IRA benefits payable to the trust are exempt from any and all

claims of creditors of the decedent. According to the court, if Wanda had

named specific beneficiaries of the IRA, then the IRA proceeds would

automatically pass at her death to the named beneficiaries. However,

Wanda named her revocable trust as the beneficiary of her IRAs, and the

legislature has determined that assets in a revocable trust are subject to

the claims of creditors of the settlor at the death of the settlor.

The Kansas Uniform Trust Code provides that during the lifetime

of the settlor, the property of a revocable trust is subject to the claims of