18 Nov Protecting your child’s inheritance from creditors

 Q. Most of my assets are in IRA accounts (my deceased husband’s and my lump sum pension and 401(k)). My four children will inherit these accounts. One of my children worked on Wall Street and about eight years ago all of his assets were frozen, he was found guilty of the charges and was sentenced to prison for which he served two years. His assets were taken to pay fines, which left him nothing to pay his income taxes. Right now he has nothing. Is there any way to leave him his share of my IRAs in a way that would protect his inheritance from the liens the IRS has against him? Are these liens likely to expire at the ten-year limit? I am 75 years old and have a terminal illness and I am not sure what to do.

A. Wow, that’s a doozy.

But yes, you can protect your son’s share of his inheritance, but there is no free lunch.

There is no legal way that 1) your son can have unfettered access to his inheritance, and 2) his creditors cannot reach it, said Nancy Heslin Reading, an estate planning attorney with Reading Law Firm in Newton.

There are ways, however, that your son can benefit from his inheritance. It will just require careful estate planning.

At the outset, Reading said, you need to understand that you should expect to pay quite a bit more for this plan than you would pay for “a simple will.”

“You absolutely do not want a simple will, and a good estate plan will require a qualified attorney to spend time conferencing with you, and then drafting estate planning documents that will be tailored to your objectives,” she said. “A discount attorney is not likely to know how to draft the very nuanced kind of will that you will need.”

When you speak with an attorney and learn the costs, know that if the price seems too steep for your budget, you can ask if you can pay in installments.

Reading said an attorney with experience in drafting sophisticated estate planning documents can assist you by drafting a will that includes language that will allow your executor to use your son’s inheritance to fund an irrevocable trust with your son as sole beneficiary. This will be particularly tricky with tax-deferred assets such as IRAs and 401(k), she said, but a seasoned estate planning attorney will know how to do it.

On your question about IRA tax recovery liens, Reading recommends you search for an estate planning attorney with IRA experience. She said you should do an internet search with the following terms: “estate planning attorney” and “New Jersey” and “Former Internal Revenue Service Agent.”

“Lots of good candidates will pop up. Read the credentials of each attorney carefully, and then look on Martindale.com to see what kind of client and/or peer evaluations are there,” Reading said.

When you think you have someone you want to meet, be prepared to interview him or her at the first appointment.

“Make sure he or she listens to what your objectives are, and responds appropriately,” she said. “If the attorney isn’t listening well at the outset, find someone else.”

And good luck.

Email your questions to .

This story was first posted in November 2014.