CLARITY BLOG

IS YOUR INHERITED IRA PROTECTED FROM CREDITORS?

By John C. Rogers, Attorney, Incline Law Group

This question is important to those who receive an IRA as a beneficiary, but more important to those who plan to pass an IRA to children or other beneficiaries. The latter have the opportunity to plan so that the inherited IRA includes protection from creditors.

In a recent landmark decision, the U.S. Supreme Court held that an inherited IRA does not qualify for the “retirement funds” exemption under the bankruptcy code Clark v. Rameker, 573 U.S. ___ (2014).

In that case, IRA beneficiaries filed for Chapter 7 bankruptcy protection and claimed about $300,000 in an inherited individual IRA as exempt “retirement funds.” (See 11 U. S. C. Sec. 522(b)(3)(C).)

The court decided that funds in an inherited IRA were not “retirement funds” intended to be protected by the exemption.

The court pointed to three legal characteristics of inherited IRAs that clearly distinguished them from protected “retirement funds.” (1) Inherited IRAs can never be increased by contributions from the inheriting holder. (2) Holders of an inherited IRA must withdraw funds from the account no matter how far they are away from retirement. And finally, (3) the holder may withdraw the entire balance of the account at any time, for any purpose, without penalty.

The policies that allow original IRA holders to exempt “retirement funds” from the reach or creditors help assure that IRA funds will be available to fund necessities during retirement years. Because of the distinguishing characteristics described above, an inherited IRA operates in opposition to those policies.

If you are the holder of an IRA and you anticipate naming children or others as beneficiaries, and if you want to provide creditor protection for those beneficiaries, there are a number of mechanisms that may achieve this goal.

If you already hold an inherited IRA, you may want to consult with an attorney regarding the pros and cons of liquidating that IRA and investing in other protected assets.

FANNIE MAE CHANGES MORTGAGE ELIGIBILITY RULES AFTER SHORT SALE AND DEED IN LIEU

By Cassell von Bayer, Attorney, Incline Law Group

One of often cited selling points for homeowners to undertake a short sale rather than a foreclosure sale is the ability to purchase a new home with financing in a shorter period of time. While all lenders have different eligibility requirements, most lenders current guidelines fall within a 2 to 5 year waiting period after a short sale or deed in lieu of foreclosure. While FHA guidelines may allow a borrower to obtain a new mortgage within one year of a short sale, those guidelines provide for several restrictions and FHA loans require significant and very costly mortgage insurance premiums.

Fannie Mae continues to be one of the largest mortgage holders and has up until now provided borrowers with mortgage eligibility two years after a short sale. Aside from FHA and VA loans, Fannie Mae has maintained the shortest wait periods after a derogatory credit event such as short sale or foreclosure. As of August 16, 2014 that will change. For all loan applications taken on or after August 16, 2014, Fannie Mae will impose a four year waiting period after a short sale and seven year waiting period after a foreclosure sale. Equally as important, for loan applications taken before August 16, 2014, the lender must document that the short sale or deed in lieu was completed two or more years from the disbursement date of the new loan. Similarly, where your credit report shows a “charge off”, meaning a lender, such as a second mortgage holder after a short sale, has reported the account charged off for accounting purposes, borrower’s may be subject to a four year waiting period. The new rules were issued on June 17, 2014, and as noted go into effect August 16, 2014. For the specifics please see: https://www.fanniemae.com/content/release_notes/du-do-release-notes-08162014.pdf

It is difficult to imagine that these new restrictions will aid the housing recovery or the reconstitution of the American Dream.

INCLINE LAW GROUP WELCOMES JEREMY L. KRENEK

Licensed to Practice in California and Nevada

Jeremy L. KrenekIncline Law Group, LLP, is pleased to announce that Jeremy L. Krenek is now licensed to practice in both California and Nevada. Jeremy first worked at Incline Law Group (ILG) as an intern during the summer of 2011, and began working full time as a clerk for ILG in August of 2013. A Texas native, Jeremy graduated with honors from Texas State University. After initially working in sales, Jeremy and his wife Kelli moved to Incline Village and spent two winters working at the Diamond Peak ski area as snowboard and ski instructors. Determined to become full-time residents, they both returned to school; Kelli attended nursing school while Jeremy entered Santa Clara University School of Law. During his final year of law school, Jeremy competed in multiple Honors Moot Court competitions with stellar results. Jeremy and Kelli now call Incline Village home.

Jeremy’s practice will focus on general business and real estate law, family law, litigation and sports law.

Jeremy remains a dedicated snowboarder, and can be found most weekend winter mornings tearing up the slopes. In the summer, you’ll find him golfing, wakeboarding on Lake Tahoe and four-wheeling in his Jeep. Incline Law Group is very pleased to have Jeremy on board to help support the needs of our clients in northern Nevada and northern California. Says Andy Wolf, ILG managing partner, “Jeremy is committed to ILG’s continued growth and success, and we expect the firm’s ability to serve our community will benefit greatly as a result.”

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Incline Law Group, LLP – A Law Firm Committed to Excellence & Committed to You. Incline Law Group, LLP is a boutique law firm located on the North Shore of Lake Tahoe. The firm, founded in 1973 by John C. Rogers, has earned a reputation for professionalism, discretion, diligence and positive results. Our areas of practice include change of residency, creation and management of entities, contracts, real estate, asset protection, family law, commercial transactions, civil litigation and estate planning. All of our attorneys are licensed to practice in Nevada and California.

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