On June 12, 2014, the U.S. Supreme Court ruled that inherited IRAs aren’t protected from the reach of creditors and other third parties. An “inherited IRA” is your IRA after you die and leave it to your beneficiaries. Your personal IRA remains protected while you are alive, but the Supreme Court ruling raises many significant issues on the protection of your IRA for your beneficiaries after you die.

Many other legal and financial advisers were shocked by this decision. We anticipated this result a long time ago. So, we have been recommending our clients plan under the assumption that this day would come eventually.

This isn’t something for everyone to be alarmed about immediately, but we are recommending updating estate plans consistent with the Supreme Court decision

If you haven’t taken advantage of the asset protection strategies we recommend to our clients, then now is a good time to review your planning and determine if it still accomplishes the objectives of your estate plan.


If you have a high quality Revocable Living Trust, then it probably contains a clause allowing you, as Trustee, to appoint a Co-Trustee. This is a useful and powerful tool you should know about. In the right circumstances, it can make the management of your property run smoother and bring you peace of mind in stressful times. If you have one of those internet trusts, it’s unlikely your trust contains such a tool, or if it does, it wasn’t customized to your family’s needs. In that case, you might want to look into amending your trust to add this feature. Georgia law allows a trust maker to grant to a Trustee (who may or may not be the trust maker) the power to appoint a Co-Trustee. The Co-Trustee can even be one of the trust’s beneficiaries. If you are an estate planning client of ours, then you Living Trust probably contains a clause similar to this one:

Section 3.05      Appointment of a Co-Trustee Any individual Trustee may appoint an individual or a corporate fiduciary as a Co-Trustee. This Co-Trustee will serve only as long as the appointing Trustee serves, or as long as the last to serve if more than one Trustee appointed the Co-Trustee. This Co-Trustee will not become a successor Trustee upon the death, resignation, or incapacity of the appointing Trustee, unless appointed under the terms of this instrument. Although this Co-Trustee may exercise all the powers of the appointing Trustee, the combined powers of this Co-Trustee and the appointing Trustee may not exceed the powers of the appointing Trustee alone. The Trustee appointing a Co-Trustee may revoke the appointment at any time, with or without cause.

At this point, you may be asking yourself when would you need such a power and how do you go about appointing a Co-Trustee. Here are just a few examples of the situations in which our clients have appointed one or more Co-Trustees, on either a temporary or permanent basis:

  • Trust maker was going into the hospital for a serious operation that would require a lengthy rehabilitation period. It would have been difficult for the trust maker to manage trust property during the rehabilitation period.
  • Joint trust makers (husband and wife) were planning a European vacation, and did not want to think about “business” while on the trip.
  • Elderly trust maker realized that managing trust property had become burdensome and that it was time to turn to the children for assistance.
  • Trust makers decided that appointing an adult child as a Co-Trustee would better prepare the child for managing the property once the child inherited it from the parents.
  • Joint trust makers (husband and wife) decided that husband would have to enter a nursing home due to husband’s declining health. The wife was inexperienced in business matters and was already relying on an adult son for guidance.

How does a Trustee use this power? First, while there is no requirement for a written document, the Trustee should at least prepare a document, signed both by the Trustee and the new Co-Trustee, as evidence of the appointment. The Trustee should ask an experienced estate planning attorney to prepare this document. Second, all Trustees, including the new Co-Trustee, should sign an updated Certification of Trust. The Certification may need to be provided to certain third parties the Trustees regularly deal with. Georgia law recommends the minimum contents to be provided in the Certification. If there is disharmony in your family, then these steps may be deemed insufficient by your attorney, and additional planning may be required in some cases. WARNING: If your Living Trust does not contain a power to appoint a Co-Trustee, do not use the language above. Get an attorney to do it for you, so it can be customized to your circumstances. Plus, you cannot add such a provision without adding other provisions that affect such matters as income and estate taxes, asset protection planning, and other issues.