On June 12, 2014, the United States Supreme Court, in a landmark case with far-reaching implications, ruled that inherited
IRA accounts are no longer creditor-protected in a bankruptcy proceeding. Frequently, IRA owners designate their spouse
to be the beneficiary when they die. Almost always, children or grandchildren are then named as contingent beneficiaries. In
light of this decision, doing so imposes the risk that these ‘inherited’ IRAs are vulnerable to the claims of creditors.

IRAs are ‘Individual Retirement Accounts’ that allow individuals to direct pretax income, up to specific annual limits,
toward investments that can grow tax-deferred. Due to the tax advantages of IRAs, they often accumulate the most growth
and are the last asset to be spent during one’s lifetime. Thus, they often become one of the largest assets people have at time
of death. An inherited IRA is an IRA acquired by a non-spousal beneficiary of a deceased IRA owner.

Since IRAs offer protection from the claims of creditors while the owner is alive, most people assume inherited IRAs
will be protected from the claims of creditors as well. However, The Supreme Court’s recent ruling states otherwise.
Therefore, it is more important now than ever to consider establishing an IRA trust to be the beneficiary as opposed to
naming an individual(s) as an outright beneficiary. Trusts can help protect these assets from existing or potential creditors
of beneficiaries. Further, the trust vehicle can ensure ongoing management and control over ultimate disposition, while
allowing flexibility in distributing assets among individual beneficiaries.

Action Recommended
Everyone who has beneficiaries or contingent beneficiaries as someone other than their spouse should consider trusts as
beneficiaries. It is important to schedule a meeting or phone call with an attorney to discuss whether a trust is appropriate in
light of this recent landmark opinion by the Supreme Court. Schanker and Hochberg, P.C. offers these meetings at a no-fee
basis. You can reach us at (631) 424-5400.