A Boutique Trusts & Estates Law Firm

Supreme Court: “Your Children’s Creditors May Inherit Your IRA”

Tuesday, June 17th, 2014

An individual retirement account (IRA) is generally exempt from the creditors of the original owner or participant. Even after the death of the participant, a surviving spouse can achieve the same protection from his own creditors by “rolling over” the account into his own IRA (assuming the spouse is named as beneficiary). When someone besides the spouse is named as beneficiary, however, is the inherited IRA exempt from the creditors of that beneficiary?

Maybe not. The U.S. Supreme Court ruled last week that the federal bankruptcy exemption for IRAs does not extend to inherited IRAs. In a unanimous opinion, the court reasoned that after the death of the participant (and spouse), the inherited IRA stops being “retirement funds” for federal bankruptcy purposes, because it loses any direct connection with anyone’s retirement.

Maryland law provides a separate basis for shielding an IRA and any other “retirement plan” from creditors, but no Maryland court has yet addressed whether the statute covers inherited IRAs. Courts in other states (interpreting other statutes) have gone both ways. And even if inherited IRAs are protected under Maryland law, Maryland law might not even apply. The creditor’s rights will depend on the law of the beneficiary’s state (not the participant’s state).

If protecting an IRA from the potential creditors of your children is a significant part of your estate plan, the solution may be to name a trust as the IRA’s secondary beneficiary (with the spouse usually being the primary beneficiary). The trustee can manage the inherited IRA on behalf

of the children, distributing assets to the children as appropriate, but the trust will protect the inherited IRA from the children’s creditors.

But beware: it is not always easy to continue the income tax benefits of an inherited IRA if the IRA is held in a trust. If you want to give the trustee the option of continuing the tax-deferral (for traditional IRAs) or tax-free growth (for Roth IRAs) after your death, the terms of the trust must fit within certain narrow constraints. The required terms will mesh well with some estate plans and less well with others.

With careful counseling, however, it is frequently possible to give your children both the tax benefits of an IRA and the creditor protection of a trust, all in a manner consistent with your personal estate planning goals.


For Immediate Release

Contact: Jane Frankel Sims


Contact: Frank Campbell


Sims & Campbell Estates and Trusts

Frankel Sims Law and Holden & Campbell
Merge to Form Sims & Campbell

Firm will offer comprehensive Trusts & Estates services through offices in Towson and Annapolis

TOWSON, Md. (April 26,2019)  Frankel Sims Law and Holden & Campbell have jointly announced the merger of their firms to create a boutique Trusts & Estates law firm providing comprehensive services in the fields of Estate Planning, Estate Administration, Trust Administration and Charitable Giving. The combined firm will be named Sims & Campbell and have offices in Towson, Md. and Annapolis, Md.  Jane Frankel Sims and Frank Campbell will lead and hold equal ownership stakes in the firm.

Sims & Campbell will have 9 attorneys and 15 legal professionals that handle every facet of estate and wealth transfer planning, including wills, revocable living trusts, irrevocable trusts, estate and gift tax advice, and charitable giving strategies.  The firm will focus solely on Trusts & Estates but will serve a wide range of clients, from young families with modest resources to ultra-high net worth individuals.  This allows clients to remain with the firm as their level of wealth and the complexity of related estate and tax implications change over time. 

“By joining forces, we have expanded our footprint to conveniently serve clients in Maryland, D.C. and Virginia” said Jane Frankel Sims.  We are seeing some of the greatest wealth transfer in our country’s history, and we want to continue to be on the leading edge of helping our clients maintain and enhance their family’s wealth.  In addition, we aim to serve our clients for years to come, and the new firm structure will allow Sims & Campbell to thrive even after Frank and I have retired.”    

“Jane and I have always admired each other’s firms and recognized the need to provide even greater depth and breadth of focused expertise to help families amass and protect their wealth from generation to generation,” said Frank Campbell.  “Now we have even greater capabilities to make a real difference for our clients.” 

The Sims & Campbell Towson office is located at 500 York Road, on the corner of York Road and Pennsylvania Avenue in the heart of Towson.  The Annapolis office is currently located at 716 Melvin Avenue, and is moving to 181 Truman Parkway in August, 2019.  For more information, visit www.simscampbell.law.