Mathieu, Ranum & Allaire, PLLC
  • Boise 208-309-0390
  • Ketchum 208-309-0390
An Idaho Firm With a National Perspective

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Protecting Your IRA’s Tax-Deferral for Your Beneficiaries



On April 23, 2013, in Rameker v. Clark[i], the US Court of Appeals for the 7th Circuit stated that an inherited IRA (where the individual beneficiary is not the spouse) is not exempt from creditors. The court reasoned that that kind of account is not a “Retirement Account” because the funds are not being held until retirement but could be accessed freely by the beneficiary. To permit this account to be exempt from creditor claims would open up a Pandora’s box of assets exempt from creditors.

Under the laws of the state of Idaho[ii], an inherited IRA is exempt from creditors. However, you cannot predict where your children or others you name as beneficiaries will be living in the future and they could be subject to laws and court cases that do not agree with those of Idaho. There is a diversity of opinion across the country about whether inherited IRAs are creditor-exempt or not. Therefore, if you are concerned about protecting your IRA after your death from the claims of creditors against your children or other individuals, it is best to name a trust for their benefit as the beneficiary of the IRA rather than name an individual directly.

Properly naming a trust as a beneficiary so that the assets in the IRA can be paid out over an individual’s life expectancy - rather than more quickly, (thereby preserving the value of income tax-deferral on income and capital gains earned in the IRA), requires compliance with a broad array of very complicated technical requirements that are in turn dependant on the facts pertaining to your and your beneficiary’s situation. Therefore, we STRONGLY urge you to consult with your legal advisor should you wish to name a trust as the beneficiary.


The foregoing is NOT legal advice. We have prepared these materials to inform and educate. They are not, and should not be considered, legal opinions or advice to anyone, nor do they create an attorney client relationship by your reading them. These materials may not reflect the most current legal developments in the applicable area of law. Furthermore, this information should in no way be taken as an indication of future results.


[i] See Rameker v. Clark, No. 12-1241 & 12-1255, United States Court of Appeals (7th Cir. 2013).


[ii] See also In Re McClelland, 2008 WL 89901 (Bkrtcy. Idaho 2008) where the Bankruptcy court stated that the Idaho State Legislature had “painted with a broad brush” the exemption of retirement accounts from creditor claims and thus an inherited IRA is exempt from creditors.

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