New York Estate Planning & Elder Law Blog
In 2018 new legal reforms were implemented that will effectively protect estate trusts from retirement benefit plan asset seizure by creditors.
Reform of the Employee Retirement Income Security Act of 1974 (ERISA) in the past year extends protections to estate trusts, and their assets. The latest ERISA rules cover managed retirement plans and welfare benefit plans held by nearly fifty-four percent of retirement benefits, and fifty-nine percent of insurance benefits associated with those plans. With the new reform, trust assets will be at a lesser risk of court ordered attachment by creditors for the collection of a decedent’s outstanding debts due to fiduciary bonding agreements to nondisclosure.
Prudential Measure, Fiduciary Reform
The new ERISA fiduciary rules were enacted to further prudential protections of managed retirement funds. Promoting a new era of transparency and accountability in pension fund management, the Labor Department’s Employee Benefits Security Administration, Internal Revenue Service (IRS), and Pension Benefit Guaranty Corporation responsible for enforcement of ERISA guidelines to plan member services, covers individual plan members when a prudential breach occurs.
ERISA Reform and Pension Benefits
Cited as the reason for the most recent rule changes, involve criminal violations under Title 18 of the U.S. Criminal Code. ERISA describes targeted criminal misconduct in the commission of: 1) Theft or embezzlement (18 U.S.C. Section 664); 2) False Statements or Concealment of Facts (18 U.S.C. Section 1027); or 3) Offer, Acceptance, or Solicitation to Influence Operations of Employee Benefit Plans (18 U.S.C. Section 1954) during the management of a fund. Fiduciary status binds financial managers to nondisclosure. ERISA reform also allows for investigation of prudential breaches that might otherwise lead to devaluation or total loss of retirement pension funds.
When an Estate is at Risk of Attachment
ERISA-qualified pension plan risk of seizure has been reduced with legal reform. Estate retirement assets not qualifying as exempt under ERISA rules, may still be subject to attachment if a judgment is decided on behalf of a creditor. Non-ERISA pension funds are always at risk of creditor seizure if a court orders attachment. An executor of an estate trust should review Keogh Plans; Simplified Employee Pension (SEP) Plans; Traditional, Roth and SIMPLE Individual Retirement Accounts (IRAs); “employer-only” plans not benefitting employees; 403(b) plans for employees of a public school or university; and government plans and church plans exempt from ERISA protections.
Legal rules to non-ERISA account exemptions differ by state. It is important to note that distributions from qualified retirement assets protected under ERISA may still be attached with creditor collections. If a judgment is levied, a creditor may be able to seize all or part of the participant’s account with exception of accrued benefit interest which is “non-forfeitable.” Spouses have a right to a portion of pension benefits should attachment proceed.
An Estate Lawyer Can Help
ERISA rules now require all financial professionals be licensed fiduciaries. Pension fund reform is a positive step in the protection of estate assets from creditor attachment. Protect the worth of an estate with expert advice from an attorney at law specializing in estate law. Ettinger Law Firm is an attorney practice providing legal advisory on estate planning matters. Contact Ettinger Law Firm for a consultation about a probate law matter.