This article originally appeared on the Morris, Hall & Kinghorn, P.L.L.C. blog.

On June 12, 2014, a unanimous decision by the US Supreme Court forever changed how Americans need to plan for their IRAs. The precedent setting case of Clark v Rameker has clearly established that once an IRA is inherited, it is no longer considered a “retirement” asset and is therefore not protected under the US Bankruptcy Code. This leads us to question of what other protections will not be available through an IRA, such as judgment creditors and ex-spouses.

West HunsakerPassing your IRA is no longer as simple as listing your loved ones on the beneficiary form. Without additional effective planning some of your most significant assets will most likely be exposed and unprotected. Fortunately, there are advanced estate planning tools available to provide asset protection for a beneficiary, while still allowing the significant tax advantages of stretching the IRA. These tools are a Qualified Living Trust and a Stand Alone IRA Trust.

It is important to note that beneficiaries who live in Arizona do have some protections that were not lost as a result of the Supreme Court’s decision. Arizona opted out of the Federal Bankruptcy scheme upon which this case was based. Notwithstanding the level of protection provided if your beneficiary lives in Arizona, it is still best to leave your IRA in a trust for them. If you have beneficiaries who do not live in Arizona, or may at some time move out of Arizona, your estate plan definitely needs to be updated to include protection for your IRA. It is not very often that we get a unanimous decision from the Supreme Court. This will most certainly lead to future challenges to inherited IRAs. Unfortunately, not every practitioner understands the complexities of creating or maintaining a qualified trust or a stand alone IRA trust. It is increasingly important to have your plan reviewed by an experienced estate planner who understands these very complicated issues.

Learn more about using estate planning tools to protect your family and benefit Phoenix Children’s Hospital.

West Hunsaker is an attorney with Morris, Hall & Kinghorn, a premier estate planning law firm, and also serves as a member of the Planned Giving Advisory Committee at Phoenix Children’s Hospital Foundation.