[WSBARP] IRA Proceeds

Mon Mar 31 11:15:54 PDT 2014

Hi Ralph,

Yes, I agree – I should have been more clear about that the first time –
see citation below.

RCW 6.15.020
Pension money exempt — Exceptions — Transfer of spouse's interest in
employee benefit plan.

(1) It is the policy of the state of Washington to ensure the well-being
of its citizens by protecting retirement income to which they are or may
become entitled. For that purpose generally and pursuant to the authority
granted to the state of Washington under 11 U.S.C. Sec. 522(b)(2), the
exemptions in this section relating to retirement benefits are provided.

…

     (3) The right of a person to a pension, annuity, or retirement
allowance or disability allowance, or death benefits, or any optional
benefit, or any other right accrued or accruing to any citizen of the
state of Washington under any employee benefit plan, and any fund created
by such a plan or arrangement, shall be exempt from execution, attachment,
garnishment, or seizure by or under any legal process whatever. This
subsection shall not apply to child support collection actions issued
under chapter 26.18 <http://apps.leg.wa.gov/rcw/default.aspx?cite=26.18> ,
26.23 <http://apps.leg.wa.gov/rcw/default.aspx?cite=26.23> , or 74.20A
<http://apps.leg.wa.gov/rcw/default.aspx?cite=74.20A>  RCW if otherwise
permitted by federal law. This subsection shall permit benefits under any
such plan or arrangement to be payable to a spouse, former spouse, child,
or other dependent of a participant in such plan to the extent expressly
provided for in a qualified domestic relations order that meets the
requirements for such orders under the plan, or, in the case of benefits
payable under a plan described in 26 U.S.C. Sec. 403(b) or 408 of the
internal revenue code of 1986, as amended, or section 409 of such code as
in effect before January 1, 1984, to the extent provided in any order
issued by a court of competent jurisdiction that provides for maintenance
or support. This subsection does not prohibit actions against an employee
benefit plan, or fund for valid obligations incurred by the plan or fund
for the benefit of the plan or fund.

     (4) For the purposes of this section, the term "employee benefit
plan" means any plan or arrangement that is described in RCW 49.64.020
<http://apps.leg.wa.gov/rcw/default.aspx?cite=49.64.020> , including any
Keogh plan, whether funded by a trust or by an annuity contract, and in 26
U.S.C. Sec. 401(a) or 403(a) of the internal revenue code of 1986, as
amended; or that is a tax-sheltered annuity or a custodial account
described in section 403(b) of such code or an individual retirement
account or an individual retirement annuity described in section 408 of
such code; or a Roth individual retirement account described in section
408A of such code; or a medical savings account or a health savings
account described in sections 220 and 223, respectively, of such code; or
a retirement bond described in section 409 of such code as in effect
before January 1, 1984. The term "employee benefit plan" shall not include
any employee benefit plan that is established or maintained for its
employees by the government of the United States, by the state of
Washington under chapter 2.10
<http://apps.leg.wa.gov/rcw/default.aspx?cite=2.10> , 2.12
<http://apps.leg.wa.gov/rcw/default.aspx?cite=2.12> , 41.26
<http://apps.leg.wa.gov/rcw/default.aspx?cite=41.26> , 41.32
<http://apps.leg.wa.gov/rcw/default.aspx?cite=41.32> , 41.34
<http://apps.leg.wa.gov/rcw/default.aspx?cite=41.34> , 41.35
<http://apps.leg.wa.gov/rcw/default.aspx?cite=41.35> , 41.37
<http://apps.leg.wa.gov/rcw/default.aspx?cite=41.37> , 41.40
<http://apps.leg.wa.gov/rcw/default.aspx?cite=41.40> , or 43.43
<http://apps.leg.wa.gov/rcw/default.aspx?cite=43.43>  RCW or RCW 41.50.770
<http://apps.leg.wa.gov/rcw/default.aspx?cite=41.50.770> , or by any
agency or instrumentality of the government of the United States.

Best regards,

Warren L. Baker

Amicus Law Group, PC | 1325 Fourth Avenue, Suite 940 | Seattle, WA 98101

Phone: 206.624.9410 | Fax: 206.515.2084

E-mail:  <mailto:warren at amicuslawgroup.com> warren at amicuslawgroup.com

Blog:  <http://www.amicuslawgroup.com/author/warren-baker>
www.AmicusLawGroup.com/author/warren-baker  

Full Bio:
<http://amicuslawgroup.com/clients/amicus/wordpress/wp-content/uploads/201
3/10/Warren-L.-Baker-Tax-Estate-Attorney-Services-Bio-Amicus-Law-Group-PC4
.pdf> View (pdf)

Self-Directed IRA Consulting   |  Estate & Trust Planning  |  Business
Structuring and Succession

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From: wsbarp-owner at lists.wsbarppt.com
[mailto:wsbarp-owner at lists.wsbarppt.com] On Behalf Of Ralph Maimon
Sent: Monday, March 31, 2014 10:40 AM
To: wsbarp at lists.wsbarppt.com
Subject: RE: [WSBARP] IRA Proceeds

Warren, 

I have a 59 year old spouse IRA beneficiary who lives in Washington.  Her
husband had a plumbing contracting company (incorporated as an S Corp) and
recently passed away. 
She has a roll over IRA.    No bankruptcy involved. The key question is
whether the Roll Over IRA is protected from her husband's creditors
(assuming that there is personal liability). The responses I have to date,
in the non-bankruptcy situation, is that it is exempt.  Do you agree?

Ralph Maimon 
Law Office of Ralph Maimon, P.S. 
2825 Eastlake Avenue East
Suite 120
Seattle, WA 98102
Tel: (206) 323-0911
Fax: (206) 462-1505  (New Fax Number)

rmaimon at maimonlaw.com

CONFIDENTIALITY NOTICE: This email message may contain confidential or
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please do not review, disclose, copy, or distribute the email. Instead,
please notify us immediately by replying to this message or telephoning
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TAX ADVICE NOTICE: IRS Circular 230 requires us to advise you that, if
this communication or any attachment contains any tax advice, the advice
is not intended to be used, and cannot be used, for the purpose of
avoiding federal tax penalties. A taxpayer may rely on professional
advice to avoid federal tax penalties only if the advice is reflected in
a comprehensive tax opinion that conforms to stringent requirements.

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  _____  

From: wsbarp-owner at lists.wsbarppt.com
[mailto:wsbarp-owner at lists.wsbarppt.com] On Behalf Of Warren Baker
Sent: Friday, March 28, 2014 3:53 PM
To: wsbarp at lists.wsbarppt.com
Subject: RE: [WSBARP] IRA Proceeds

Hi Ralph,

IRC Section 402(c)(9) allows a rollover the deceased spouse’s IRA to a
surviving spouses IRA.  Further, the Treasury Regulations state that the
surviving spouse thereafter treats the IRA as his/her own.  Keep in mind
that there can be both pros and cons to this treatment.  For example, if
the surviving spouse is significantly younger (e.g. under 59 ½ years old)
than the deceased spouse and the surviving spouse might need to take
distributions soon, rolling the IRA into the surviving spouses name might
not be a good idea.  On the other hand, if the surviving spouse is much
older, rollover the funds over could accelerate “required minimum
distributions”.

With regards to creditor issues, the protections depend on the type of IRA
– for example, a SEP IRA is technically covered by ERISA, which generally
grants higher creditor protection (for both original account owner and
inherited owner).  For other types of IRAs, the creditor protection can
depend on the type of debt involved (e.g. bankruptcy vs. non-bankruptcy).
For example, the original accountholder of an IRA can generally have up to
$1M protected from bankruptcy creditors and if, in your situation, the
surviving spouse had rolled the funds over and treated the account as her
own going forward, she would be entitled to this protection (note that the
trend with bankruptcy courts across the country is to favor bankruptcy
creditors when the IRA is treated as an inherited IRA – i.e. a non-spouse
inherits the IRA).  Also, watch out if the IRA has been involved in any
“nontraditional” investments (e.g. real estate, privately-held companies,
etc.).  Courts are starting to realize that these investments have the
potential to raise “prohibited transaction” problems – which, if found,
can result in the retroactive invalidation of the IRA – meaning that the
general creditor protections of the IRA are eliminated – not to mention
horrific income tax / penalties if the IRS finds out about the prohibited
transaction (for more on this, take a look at my article that was in the
most recent WSBA Taxation Law newsletter attached – pardon the
not-so-subtle personal plug!).

The creditor protection issue for IRAs is non-bankruptcy situations can be
much murkier, depending on where the beneficiary of the IRA (i.e. the
person who inherited the IRA) lives.

Of course, an IRA owner that is concerned about his/her beneficiaries’
creditors can leave the IRA to an “IRA Legacy Trust” (either a stand alone
trust or within the IRA owner’s Will) – which can not only provide
additional creditor protection, but also control the beneficiary’s ability
to potentially accelerate IRA distributions in a tax-foolish manner.

Have a good weekend everyone,

Warren L. Baker

Amicus Law Group, PC | 1325 Fourth Avenue, Suite 940 | Seattle, WA 98101

Phone: 206.624.9410 | Fax: 206.515.2084

E-mail:  <mailto:warren at amicuslawgroup.com> warren at amicuslawgroup.com

Blog:
<http://cp.mcafee.com/d/FZsS92gOd6QmjhOVtwsYMMrKrhKOOYNtZxcSztBBVyXVEVhdET
ppuoK-MOrhKOOYNtN54T5npaRw2BtAHm1-CendGX9mI3ZcsKr8mttvppvW_fFL8LFEZuVt4QsE
IYYztdwsPORQr8EGTpoVkffGhBrwqrhdFCXCXCM0mGOITg_j16dmRKnPmVAWNMNIo_0KgQHYjp
yx3oH5WC8v457OFeD6a4dyIJfBPqaarMVxAS2NF8Qg6BI1hwp40m5ziWq83h06wIgd40mzmT-x
gSCUrUP15> www.AmicusLawGroup.com/author/warren-baker  

Full Bio:
<http://cp.mcafee.com/d/FZsS76QmjhOVtwsYMMrKrhKOOYNtZxcSztBBVyXVEVhdETppuo
K-MOrhKOOYNtN54T5npaRw2BtAHm1-CendGX9mI3ZcsKr8mttvppvW_fFL8LFEZuVt4QsEIYYz
tdwsPORQr8EGTpoVkffGhBrwqrjdFCXCXCM0uGOITg_j16dmRKnONYLxeCqHaPtcclywJ7WkMM
InJm4_xf6RzWWxj4XEIUzv05Scvwn2L5NDiLNbwDgYKdkDI_by4VRz3ONso-9ClLEn6plby2IH
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Self-Directed IRA Consulting   |  Estate & Trust Planning  |  Business
Structuring and Succession

IRS CIRCULAR 230 DISCLOSURE - To ensure compliance with treasury
department and IRS regulations, we inform you that, unless expressly
indicated otherwise, any federal tax advice contained in this
communication (including any attachments) is not intended or written by
AMICUS LAW GROUP, PC to be used, and cannot be used by the taxpayer, for
the purpose of (i) avoiding penalties that may be imposed on the taxpayer
under the Internal Revenue Code or (ii) promoting, marketing or
recommending to another party any transaction or matter addressed herein
(or any attachments).

NOTICE - This communication may contain privileged or other confidential
information. If you have received it in error, please advise the sender by
reply email and immediately delete the message and any attachments without
copying or disclosing the contents.   Thank you.

From: wsbarp-owner at lists.wsbarppt.com
[mailto:wsbarp-owner at lists.wsbarppt.com] On Behalf Of Ralph Maimon
Sent: Friday, March 28, 2014 2:19 PM
To: wsbarp at lists.wsbarppt.com
Subject: RE: [WSBARP] IRA Proceeds

I understood that to be the case but I could not find a reference.

Ralph Maimon 
Law Office of Ralph Maimon, P.S. 
2825 Eastlake Avenue East
Suite 120
Seattle, WA 98102
Tel: (206) 323-0911
Fax: (206) 462-1505  (New Fax Number)

rmaimon at maimonlaw.com

CONFIDENTIALITY NOTICE: This email message may contain confidential or
privileged information. If you have received this message by mistake,
please do not review, disclose, copy, or distribute the email. Instead,
please notify us immediately by replying to this message or telephoning
us. Thank you.

TAX ADVICE NOTICE: IRS Circular 230 requires us to advise you that, if
this communication or any attachment contains any tax advice, the advice
is not intended to be used, and cannot be used, for the purpose of
avoiding federal tax penalties. A taxpayer may rely on professional
advice to avoid federal tax penalties only if the advice is reflected in
a comprehensive tax opinion that conforms to stringent requirements.

Please contact us if you have any questions about Circular 230 or would
like to discuss our preparation of an opinion that conforms to these IRS
rules.

  _____  

From: wsbarp-owner at lists.wsbarppt.com
[mailto:wsbarp-owner at lists.wsbarppt.com] On Behalf Of Richard Wills
Sent: Friday, March 28, 2014 1:13 PM
To: wsbarp at lists.wsbarppt.com
Subject: Re: [WSBARP] IRA Proceeds

IRA proceeds paid to a designated beneficiary under the IRA agreement are
so exempt.  If the proceeds are paid, for example, to D's estate, they are
not.

On 3/28/2014 12:11 PM, Ralph Maimon wrote:

Listmates

I have a client whose husband with an IRA passed away recently. The
question is simple:  Is the IRA rollover in the wife's name exempt from
creditors claims  (no tax issues here).  

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All opinions and comments in this message represent the views of the
author and do not necessarily have the endorsement of the Washington State
Bar Association nor its officers or agents. 

===============================
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Information provided on this list should not be considered legal advice.
As with all lists - let the reader beware! No warranties or
representations are made as to the accuracy of any information provided.
All opinions and comments in this message represent the views of the
author and do not necessarily have the endorsement of the Washington State
Bar Association nor its officers or agents. 

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