Archive for September, 2009
RECENT FAVORABLE DECISION CONCERNING ASSET PROTECTION
The case of Keller v. United States, 2006 U.S. Dist. LEXIS 34100 (S.D. Tex., May 26, 2006) is a significant case for utilizing family limited partnerships for asset protection purposes. Among other things, the Court recognized that Divorce Protection (protecting family assets from depletion by ex-spouses in divorce proceedings) was a legitimate business purpose.
Also in this $40 million taxpayer victory; a family limited partnership was recognized although not formally funded before decedent’s death; a 47.5% discount was allowed for an assignee interest in the limited partnership’s bond portfolio; a bona fide sale exception to Sections 2036 and 2038 applied; and interest on a loan to borrow money from the partnership after death to pay estate taxes and other obligations was held to be deductible for estate tax purposes.
INHERITED IRA IS NOT CREDITOR – PROTECTED IN FLORIDA
In the recent decision of Robertson v Deeb, 2009 Fla. App. LEXIS 11322 (Fla. 2d DCA August 14, 2009), the Court held that an inherited IRA is not protected from creditors under Florida law. Although an IRA ordinarily is exempt from legal processes under Florida Statute § 222.21, the Court held that an “inherited” IRA is not entitled to the exemption because that section is limited to the “original fund or account”. The Court reasoned that once an IRA was inherited, it became a separate fund or account after the original fund or account passed to a beneficiary upon the death of the participant.
This decision illustrates why we often recommend that clients name trusts as beneficiaries of IRA’s, so that the creditor protections of the IRA can be extended to future generations.