IRA/401k beneficiaries

[Dash man]

We just completed revising our estate planning documents and made a lot of changes. One thing we learned based on a Supreme Court decision in 2013, is that inherited IRA and 401k accounts (other than by the spouse) are not protected from creditors or a divorce settlement.
Our attorney had us set up an IRA Trust to protect the assets and we are in the process of changing the contingent beneficiaries for all of our retirement accounts to the IRA Trust.
I hadn’t been aware of this and hadn’t seen it discussed here before.

 

[OldShooter]

This kind of stuff important and it is a big deal. Low probability, high impact. Another scenario has mom and dad gone in a single disaster with no wills, leaving minor children with possibly a court-appointed guardian and/or conservator. While the majority of folks who get these court-appointed jobs are trustworthy, some are not. Relatively unfettered access to a large pot of money is a temptation that not all can resist.

So, all kinds of pathological situations must be considered in an estate plan. One is that the kids must have wills.

 

[REattempt]

In 3/4 of States, inheritances are not subject to equitable distribution because, by law, inheritances are not considered marital property. Instead, inheritances are treated as separate property belonging to the person who received the inheritance, and therefore may not be divided between the parties in a divorce.

 

[Dash man]

In 3/4 of States, inheritances are not subject to equitable distribution because, by law, inheritances are not considered marital property. Instead, inheritances are treated as separate property belonging to the person who received the inheritance, and therefore may not be divided between the parties in a divorce.

All it takes is one little mistake for a lawyer to argue something is marital property. I learned that the hard way back in 1993.
An IRA Trust offers protection in a divorce and from creditors. With nearly $3 million in tax deferred accounts, we’ll take our attorney’s advice. Laws and court decisions change things all the time. That’s why it’s important to update Trusts and wills every few years.

 

[Sunset]

In 3/4 of States, inheritances are not subject to equitable distribution because, by law, inheritances are not considered marital property. Instead, inheritances are treated as separate property belonging to the person who received the inheritance, and therefore may not be divided between the parties in a divorce.

Inheritance can easily become marital property by accident, lots of ways it happens.