Noncompliant IRA Trusts and Circular 230 Issues

AuthorSeymour Goldberg
ProfessionSenior partner in the law firm of Goldberg & Goldberg, P.C., Woodbury, New York
Many individuals have accumulated a considerable amount of wealth in
their individual retirement accounts (IRAs). This can happen because
the IRA account holder rolled over or directly transferred retirement
assets that were accumulated in his / her qualified plan accounts such as
a 401(k), a 403(b) arrangement, or a 457(b) governmental plan to his /
her IRA account.
These retirement accounts may represent the major portion of a
taxpayer’s wealth and must be considered in developing an estate plan
for the client. Often clients are concerned about the welfare of their
beneficiaries after they are gone.
As a result of the Supreme Court opinion in Clark v. Rameker issue
on June 12, 2014, it was held that inherited IRAs are not considered to
be “retirement funds” that are protected under the bankruptcy code.
This opinion is significant especially if the nonspouse beneficiary of an
inherited IRA account has actual or potential problems with his / her
Some states have enacted legislation that protects inherited IRAs
from creditors of the nonspouse beneficiary. These states include Alaska,
Arizona, Florida, Missouri, North Carolina, Ohio, and Texas. The non-
spouse beneficiary, however, must satisfy certain domiciliary require-
ments in order to protect his / her inherited IRA accounts in a protected
state. There is nothing to stop additional states from amending their
laws from time to time to protect inherited IRAs from creditors of the
nonspouse beneficiary.
The Supreme Court did not address the issue regarding a spouse
beneficiary who treats the IRA as a beneficiary IRA and does not transfer
or roll over the IRA into a spousal rollover IRA. It is generally best for

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