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Estates Advisory
SUPREME COURT DECISION: Inherited IRAs Are Subject To Claims of Creditors and PA Recognizes Same-Sex Marriages 

July 02, 2014
Client Alert

SUPREME COURT DECISION: Inherited IRAs Are Subject To Claims of Creditors

What can be done about it? Distributions from an IRA account are governed by the terms of the IRA plan which normally permit the participant to designate a beneficiary at death. That beneficiary can be a spouse, another individual, a charity or a trust. For non-spousal beneficiaries, one could build into the designation protections against claims of creditors, even in bankruptcy. For example, the designated beneficiary could be a trust with a “spendthrift clause” that would provide protection against creditors. The trust has to be carefully crafted to deal with the minimum distributions rules and to make sure the tax consequences are minimized.

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PA Recognizes Same-Sex Marriages

On May 20 in Whitewood v. Wolf, the U.S. District Court for the Middle District of Pennsylvania held that two provisions of the Pennsylvania Domestic Relations Code violated both the Due Process and Equal Protection clauses of the U.S. Constitution. The Court recognized that there is a fundamental right to marry protected by the U.S. Constitution that extends to same-sex couples. The decision struck down the provisions of the Pennsylvania statute that (1) held that marriage is between a man and a woman; and (2) held that same-sex marriages recognized in other states are void in the Commonwealth of Pennsylvania.

The next day, Gov. Tom Corbett announced that he will not appeal the Whitewood decision on behalf of the Commonwealth. As a result, Pennsylvania has become the 19th state in the United States, along with the District of Columbia, to recognize same-sex marriages, both those celebrated in Pennsylvania and those celebrated in other jurisdictions where same-sex marriages are permitted by state law. This recognition allows same-sex married couples to access various rights and benefits previously unavailable to them, such as tax benefits, inheritance rights and property rights, among others.

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