asset protectionAsset Protection TrustEstate PlanningIRAIRA Stretch Trust

IRA Planning in Light of Robertson v. Deeb

In December of 2009, the Florida Court of Appeals concluded in Robertson v. Deeb, 16 So. 3d 936 (Fla. 2d DCA 2009), that the beneficial interest that a person owns in an inherited IRA may be subject to garnishment. In other words, an IRA that you inherit may be taken by your creditors. This is different from an IRA that you establish yourself, or a retirement plan like a 401(k) or 403(b), which are all protected against creditors.

The result itself did not surprise me much until I read an article by Kristen M. Lynch and Linda Suzzanne Griffin in the April 2010 Florida Bar Journal. Intuitively, it made sense that a creditor can go after an asset that you inherit. Usually, the rule of thumb is that unless an asset is specifically exempted, a creditor can sue to get it.

What made this case unusual, and what I was not aware of, is the fact that there was a specific statute on point, F.S. Section 222.21, which seems to indicate that money payable to the “beneficiary” of an IRA is exempt from all claims of creditors. The Court, however, stated that a beneficiary who inherits an inherited IRA is not entitled to the same protection as a beneficiary who contributes to his or her own IRA.

I do not wish to argue the merits of the Court’s decision, but I will point out that as a result of this case, anyone who has a substantial IRA should seriously consider establishing a trust for their loved ones which has “stretch” and asset protection provisions.

For many people, their IRAs are their biggest asset. It is clear, now more than ever, that if you wish to protect your IRA from creditors, you cannot simply name your loved ones as the beneficiaries without risking it being taken. Moreover, you cannot simple name a traditional trust as the beneficiary without incurring large income taxes. You need to do comprehensive IRA planning.

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One thought on “IRA Planning in Light of Robertson v. Deeb

  1. Thank you for this post. MANY of the clients that set up retirement plan trusts with us state that the main reason for wanting to do so is asset protection. The next reason is usually for the stretch-out. This has become very important to our clients whose children are in high liability exposure professions too.

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