Ninth Circuit Decision Allows FTC to Directly Levy Trust Assets — A Caution for Asset Protection Planning

On August 4, 2026, the U.S. Court of Appeals for the Ninth Circuit issued a decision that should give pause to anyone relying on  Domestic Asset Protection Trust (DAPT) for asset protection, particularly against federal agency claims. In FTC v. Hoskins, the court held that the Federal Trade Commission (FTC) could execute directly against a Las Vegas residence held in trust to satisfy a $130 million telemarketing-fraud judgment, without first bringing a separate state-law alter-ego action. The ruling represents a significant limitation on traditional asset-protection strategies when the creditor is a federal agency.

The Case

The FTC had obtained a substantial judgment against the debtors. The debtors held a residence in a trust. A Nevada district court blocked the FTC’s collection efforts, citing Nevada’s six-year statute of limitations on judgment enforcement and requiring a separate state-law proceeding to establish that the trust was the debtors’ alter ego.  The FTC appealed.  The Ninth Circuit reversed. 

Key holdings included:

• The Federal Debt Collection Procedures Act (FDCPA) preempts Nevada’s statute of limitations;
• Under the FDCPA, the FTC may levy any property “however held” in which the judgment debtors have a substantial nonexempt interest; and
• Because the debtors were trustees and beneficiaries of the trust, they retained a substantial interest in the residence. No separate alter-ego lawsuit under state law was required.

In short, federal collection procedures overrode state-law protections that asset-protection planners often rely upon.

 Asset Protection Planning Threatened? 

Asset protection planning frequently uses trusts (including irrevocable or discretionary trusts) to create legal separation between an individual and certain assets. State law often protects these trust (or another way to look at it is that these trusts exploit existing state laws) by requiring a creditor to bring an alter-ego, reverse-veil-piercing, or similar action before reaching trust assets. Statutes of limitations can also limit how long a judgment remains enforceable.

FTC v. Hoskins strips away both layers of defense when the creditor is a federal agency enforcing a judgment under the FDCPA. The court treated the debtors’ status as trustees and beneficiaries as sufficient to establish a “substantial nonexempt interest,” allowing direct levy.

This is not a wholesale invalidation of trusts. It is, however, a clear signal that trusts do not provide the same degree of insulation against federal agency collection that they may offer against ordinary private creditors.

Although the decision in the case involved a domestic trust, the reasoning and holding of the case would also apply to offshore trusts.  Its statutory foundation (FDCPA “property however held” and a substantial nonexempt interest) can be applied to interests in overseas trusts. The decision involved a domestic trust holding U.S. real property, however, and the practical obstacles to reaching assets held by an independent trustee in a strong asset-protection jurisdiction remain substantially higher.

For clients concerned about federal agency exposure (FTC, SEC, DOJ, healthcare enforcement, etc.), this reinforces two points:

• Retained interests or control in any trust (domestic or foreign) create vulnerability' and  

• True offshore protection depends far more on the location of the assets and the independence of the foreign trustee than on the formal label of the trust.

As always, outcomes turn on the specific facts, the degree of retained control, the location of the assets, and the willingness of a court to use contempt powers.

This Matters More in Certain Fields

The decision is limited to federal agency collections, but those are precisely the areas where robust asset protection is often most needed. Federal agencies with significant enforcement and collection authority include:

• The Federal Trade Commission (consumer protection and fraud matters);
• The Securities and Exchange Commission (securities and investment-related claims);
• The Department of Justice (various civil and criminal-related recoveries);
• Agencies involved in healthcare enforcement (e.g., matters arising under federal healthcare programs);
• Labor and employment-related federal enforcement; and
• Other financial regulatory bodies.

Professionals and business owners in finance, healthcare services, telemarketing or consumer-facing industries, and other heavily regulated or labor-intensive fields face elevated exposure to federal investigations, civil penalties, and large judgments. In these sectors, the ability of a federal agency to reach trust assets more directly reduces the effectiveness of conventional trust-based planning.

Practical Planning Guide

For clients concerned about potential federal exposure, several points follow:  

• Do Not Assume State-law Barriers Will Hold: Statutes of limitations and alter-ego requirements under state law may be preempted or bypassed when a federal agency collects under the FDCPA.

• Interest in the Trust Matters. Retaining powers as trustee or beneficiary can create the “substantial nonexempt interest” that allows federal levy. More complete separation may be necessary, though complete separation often conflicts with other planning goals (control, tax treatment, or flexibility).  Avoid "comfort clauses."

• Layered Planning Is Paramount:  Trusts are rarely a complete solution on their own. Liability insurance, entity structuring, compliance programs, and careful management of personal guarantees or retained interests continue to play essential roles.

• Jurisdiction and timing matter. This is a Ninth Circuit decision. Other circuits may reach different conclusions, but federal agencies will likely cite it in future collection efforts.

• Early planning is preferable. Once a federal investigation or enforcement action is underway, options narrow significantly. Proactive structuring, while still subject to fraudulent-transfer and other limits, is generally more effective than reactive moves.

 Conclusion

FTC v. Hoskins does not mean asset protection trusts trusts are useless. It does mean that asset-protection strategies built primarily on state-law formalities face a meaningful vulnerability when the creditor is a federal agency armed with the FDCPA. For clients in higher-risk industries, such as  finance, healthcare, consumer services, and similar fields, this decision reinforces the need for realistic expectations and multi-layered planning rather than reliance on any single technique.

As always, the appropriate structure depends on the individual’s circumstances, risk profile, and overall estate and business planning goals. Clients with potential federal exposure should review existing arrangements with counsel familiar with both asset-protection principles and federal collection procedures.

Source: Ninth Circuit decision in FTC v. Hoskins (Aug. 4, 2026), as reported in the Wealth Strategies Journal Daily Update of August 11, 2026.

Michigan’s New Guardianship Protections: Comparison with Ohio and Missouri

In July 2026, Michigan Governor Gretchen Whitmer signed two bipartisan bills, Senate Bill 585 and Senate Bill 586, aimed at strengthening protections for adults under guardianship. These measures, welcomed by advocates including the National Association to Stop Guardian Abuse (NASGA), address two common points of ward vulnerability in guardianship cases: the sale of a protected person’s real estate and changes to their residence.

What the New Michigan Protections Require

The new law requires a professional appraisal (conducted within the prior six months by a licensed appraiser) before a court may approve the sale of real estate belonging to a person under guardianship or conservatorship. If the court approves a sale below the appraised value, it must justify on the record why the sale is in the person’s best interest.

The law also requires a guardian to obtain court approval before changing the residence of a person under guardianship in most cases. The guardian must demonstrate that the move is in the person’s best interest, explain why it is the least restrictive appropriate setting, describe efforts made to keep the person in their home, and address the impact on relationships and activities. The court must make specific findings.

These are targeted, practical reforms focused on two high-risk decision points where abuse or overreach can quickly strip a person of their home and remaining independence.

Are These Protections Unique? Comparison with Ohio and Missouri

The Michigan protections are not entirely unique, but they tighten and clarify safeguards that vary in strength and specificity across states.

Ohio, for example, already requires court involvement for the sale of a ward’s real estate in most situations. Guardians generally must either obtain consents from the spouse and next of kin and meet an 80%-of-appraised-value threshold (for certain consent sales), or file a formal land-sale action in probate court. 

Appraisals are commonly required or expected. Ohio law also emphasizes consideration of less-restrictive alternatives before guardianship is imposed. However, Ohio does not appear to have as explicit a statutory mandate as Michigan’s new rule requiring a recent professional appraisal and on-the-record justification for any below-appraisal sale in the specific context of a protected person’s home. 

Residence changes are subject to the guardian’s duties and court oversight, but Michigan’s new bill imposes more detailed pre-move petition and best-interest findings requirements.  The weakness in Ohio law is in applying the "least restrictive means" test at the appointment of a guardian, and not requiring it specifically for changes of residency.  In order to protect a ward, a family member or agent would have to contest the change of residency, and a court may simply approve these on recommendation of a guardian in the best interest of the ward.  In short, there is no requirement that a guardian or court assure that a change of residence to an institution is the least restrictive alternate possible. 

Missouri law requires similarly court approval for the sale of real property belonging to a protectee in supervised matters and generally expects the sale price to meet a threshold related to appraised value (commonly referenced as not less than three-fourths in many supervised contexts). Guardians and conservators must act in the protectee’s best interest, and the 2018 reforms (SB 806) strengthened the least-restrictive-alternative principle and reporting requirements. Missouri does not appear to have a recently enacted, narrowly tailored statutory requirement comparable to Michigan’s mandatory recent professional appraisal plus explicit on-the-record justification for below-value sales, nor the same detailed pre-move petition process for residence changes that Michigan just adopted.

Michigan’s new laws are incremental, though, rather than rather than revolutionary. They add clearer, more specific procedural guardrails around two decisions that frequently lead to rapid depletion of a person’s assets and loss of their home. Ohio and Missouri already require court oversight of real-estate sales and impose best-interest standards, but Michigan’s 2026 bills make the appraisal requirement and the residence-change findings more explicit and harder to bypass.

Michigan’s new requirements are welcome incremental protections. They do not, however, eliminate the need for proactive planning. The most effective way to avoid the risks associated with guardianship, i.e., the loss of independence, sacrifice of family input and control, loss of the home, rapid asset depletion, and limited recourse, remains the execution of well-designed estate planning documents such as trusts with aging-in-place and guardianship advanced directives, powers of attorney, and supported decision-making arrangements, carefully drafted and deployed before capacity is lost. Once a court has appointed a guardian, even improved statutory safeguards operate after the fact and depend on judicial oversight that varies in rigor. The Michigan legislation underscores a recurring theme: when guardianship becomes the default response, protecting the person’s remaining property and preferred residence requires specific, enforceable procedural hurdles. Families and advisors in Ohio, Missouri, and elsewhere should note both the progress and the continuing gaps.Thanks to the National Association to Stop Guardianship Abuse (NASGA) for highlighting the signing of the Michigan law. 

Protecting Seniors from AI-Generated Fraud: Insights from Recent Senate Testimony

On July 29, 2026, the Senate Special Committee on Aging held a hearing titled “The AI Deception Machine: Deepfakes, Chatbots, and the New Frontier of Senior Fraud.” Paul Benda, Executive Vice President for Risk, Fraud and Cybersecurity at the American Bankers Association, testified about the rapidly evolving threat that generative artificial intelligence poses to older Americans.  

Benda’s central point was straightforward: generative AI is not inventing entirely new forms of fraud so much as making the old ones far more effective, scalable, and difficult to detect. Criminals can now produce convincing voice clones, deepfake videos, realistic photographs, tailored text messages, and fabricated online personas with relatively little technical skill and at low cost. What once required specialized talent or significant resources can now be accomplished quickly and repeatedly. The result is a form of industrialized deception that exploits the trust seniors place in familiar voices, faces, and institutions.

The hearing underscored that these tools are particularly dangerous for older adults. Many seniors remain active users of telephone, email, and messaging platforms. When a call appears to come from a grandchild in distress, a bank security department, or a government agency, and the voice or video looks and sounds authentic, the usual warning signs become harder to recognize. The technology lowers the barrier for criminals while raising the cognitive and emotional burden on the potential victim.

Benda emphasized that banks already use AI defensively, to spot unusual patterns, flag suspicious transactions, and protect accounts. The problem, he argued, is that the same technology is being weaponized on the other side of the transaction, often through channels outside the banking system itself, such as telecommunications networks and social platforms. A coordinated response is therefore necessary.

The ABA’s recommendations focused on several practical steps:

• Establishing a National Office for Scam and Fraud Prevention to provide accountable federal leadership and coordination across agencies;
• Strengthening telecommunications safeguards so that voice and messaging systems are harder for criminals to exploit;
• Improving information sharing among financial institutions, telecommunications providers, technology companies, and law enforcement;
• Supporting legislation such as the SCAM Act and modernizing identity and authentication systems; and
• Ensuring that every sector involved in the lifecycle of a scam—communications, identity verification, payment systems—bears appropriate responsibility for reducing risk.

Importantly, the testimony avoided calls to restrict beneficial uses of AI. The focus remained on reducing criminals’ ability to misuse the technology while preserving the defensive tools that institutions need to protect customers.

For those of us who work with older clients on aging-in-place and estate planning matters, the implications are direct. Financial exploitation remains one of the most common and damaging risks seniors face. AI-generated deepfakes and chatbots simply raise the sophistication of the threat. Clients and their families need clear, practical guidance: 

• verify unexpected requests through known, independent channels; 
• be skeptical of urgent demands for secrecy or immediate payment; and
• maintain open communication within the family about possible scams.

The hearing serves as a useful reminder that protecting seniors from financial abuse requires more than individual vigilance. It also depends on stronger systemic safeguards. As generative AI continues to advance, the gap between what criminals can convincingly fabricate and what an ordinary person can reliably detect will only grow. Thoughtful policy, better coordination, and continued education remain essential.

Families and advisors should treat this development as another reason to review practical protections such as trusted contact designations, transaction alerts, limited power-of-attorney scopes, and regular conversations about how to handle unexpected requests for money or information. The technology may be new, but the underlying need for caution and planning is not.

For more information and assistance in safeguarding yourself or a family member, please consider the following: 

• Safeguarding Seniors: Comprehensive Strategies to Prevent Elder Fraud and Financial Abuse;
• Rethinking Elder Abuse Strategies: How Prophylactic Planning Can Safeguard Autonomy and Aging in Place;
• Identity Theft: Credit Monitoring and Freezes (With Links to Credit Agencies);
• Undue Influence, and the Importance of Safeguards in Estate Management; and
• Handy Link - Reporting Ohio Adult Abuse or Exploitation.
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Late-Life Will Changes and the Magical Mystery Tour of Litigation- Lessons From "In Re Estate of Corbett"

When an older adult suffers a serious health event, such as a stroke, and then executes or changes a will, the stage is often set for conflict. A recent Texas case, In re Estate of Corbett, shows how quickly those conflicts can escalate and how unpredictable the legal process becomes once it starts.  

Robert Corbett died in 2016, unmarried and without children. Shortly after suffering a stroke earlier that year, he signed a new will that benefited his maternal aunt and her son. Two first cousins later challenged the will, alleging fraud, and contending that Robert lacked capacity at the time it was executed. The aunt’s estate argued the cousins had no standing because even if the 2016 will failed, an earlier 1994 will would control and still excluded the cousins.  The trial court dismissed the contest, and the cousins appealed.  

The Court of Appeals heard arguments, and in December 2025, nine years following Corbett's death, reversed the trial court finding a genuine unresolved  question of fact about whether Robert would have died intestate (without any will). If both wills were invalid, the court held, the cousins (as heirs) would have a clear financial interest. The court could not adjudicate the validity of the prior (oldest) will, since only the latest will was officially presented to the probate court.  The case was sent back for further proceedings. The appellate court found that the lower court made unclear whether the first will was valid by buttressing it's validity by the mere existence of a prior, unproven, will. Years after Robert’s death, the dispute remains unresolved.

The Real Cost of “Just Letting It Play Out”

Some lawyers and planners treat family disputes as inevitable. They argue that most contests are limited in scope and that the system eventually "sorts things out." That view understates the possible damage. Litigation is a "magical mystery tour." No one, not the clients, not the lawyers, not even the judges, can reliably predict the path, the timeline, or the ultimate cost. A case that looks straightforward can spend years in motion practice, appeals, and remands. Along the way:

• Assets sit frozen or poorly managed;
• Family relationships fracture further;
• Legal fees steadily erode the estate; and
• Heirs who may ultimately prevail suffer real harm from delay and uncertainty.

In Corbett, the fight has reached the Court of Appeals and is still not finished. The aunt's/cousins' potential inheritance, the proper administration of the estate, and the family’s ability to move forward have all been held hostage to the process itself.

Tax Implications and the Quiet Erosion of Assets in Estate Disputes

Beyond the emotional toll and the pure legal fees, prolonged estate litigation carries real tax and economic costs that steadily shrink what beneficiaries ultimately receive. These costs are often underestimated when people decide to “let the process play out."  Consider the following examples:

Tax Friction: When a will contest or related dispute keeps an estate open for years, several tax consequences commonly arise:

• Income Taxes: The estate must continue filing fiduciary income tax returns (Form 1041). Estates and trusts reach the highest federal income tax rate at a much lower threshold than individuals. Income that could have been distributed to beneficiaries in lower brackets is instead taxed at compressed rates inside the estate.

• Delayed Distributions: Beneficiaries who needed cash for living expenses, taxes, or investment opportunities may be forced to borrow or liquidate other assets while waiting.  

Legal fees paid by the estate are generally deductible as administration expenses under IRC § 2053, but only to the extent they are necessary for the proper settlement of the estate. Fees incurred primarily for the personal benefit of one group of beneficiaries may be disallowed or recharacterized, creating additional controversy and potential tax adjustments.

If the estate is large enough to be subject to estate tax, prolonged administration can complicate the alternate valuation election, the timing of deductions, and the calculation of any marital or charitable deductions that depend on what actually passes to the intended recipients.

Concrete Examples of Asset Erosion

Consider an estate of $2.5 million that becomes embroiled in a will contest lasting three to four years (a realistic timeline once appeals are involved, as in In re Estate of Corbett):

• Direct Legal Fees: $180,000–$350,000 (or more) paid from estate assets for both sides’ counsel (assuming there are only two sides and two attorneys), expert witnesses, depositions, and appeals. Even if a portion is deductible, the principal is gone.  In larger families, there are often more than two represented groups, ad therefore more than two attorneys.  It is unclear from the Corbett case, for example, whether the  

• Lost Investment Return: Assume the contested assets would otherwise have earned a conservative 5% annually. Over three years the opportunity cost on $2 million of tied-up assets exceeds $300,000 in forgone growth (before considering compounding).

• Forced Liquidation: To pay ongoing legal fees, the executor may have to sell real estate or securities at an inopportune time, during a market dip or without proper marketing, thereby realizing lower values and triggering possible capital gains tax inside the estate.

• Illiquidity Cascade: Cash is consumed first. What remains for the eventual winners may be harder-to-divide assets (closely held business interests, real estate with title issues, or personal property), increasing the chance of further disputes or fire-sale discounts.

• Income Tax Drag: Investment income retained in the estate for multiple years is taxed at the compressed fiduciary rates. The difference between estate-level taxation and taxation at the beneficiaries’ individual rates can easily reach tens of thousands of dollars.

In more severe cases, the combination of fees, lost growth, unfavorable sales, and extra income tax has been known to reduce the net amount available for distribution by 20–40% or more relative to a clean, uncontested administration.

Why Late-Life Planning Carries Extra Risk

Documents signed after a major health decline invite scrutiny. Questions of capacity, undue influence, and fraud become easier to raise and harder to dismiss. Even when the document is ultimately upheld, the mere existence of a credible challenge can trigger years of expensive litigation.  The only reliable way to avoid this particular magical mystery tour is not to board the bus in the first place.

Solutions to Vulnerable Late-life Planning

Plan early. Plan while capacity is clear. Make the hard decisions about distribution while the person whose wishes matter can still express them cleanly and repeatedly.  Let your estate plan build resilience, rather than relying on a plan that lays dormant for years or even decades.  

Strong planning tools include:

• A well-coordinated revocable trust funded during life;
• Clear, consistent beneficiary designations;
• Contemporaneous evidence of capacity and intent (medical notes, videos, or independent witness statements when appropriate); 
• Keeping and maintaining a clear and powerful actionable digital asset inventory (independent evidence of capacity may be silently maintained on digital devices like a phone, watch, or tablet, or by accessing virtual assistant history- like Alexa or Siri).
• Regular reviews so that changes are made deliberately rather than in crisis.

Revision Timing. Change your plan based on changes in the circumstances of others, rather than waiting for changes in your own. In other words, rather than awaiting your own critical illness, diagnosis, or decline before implementing or revising your estate plan, treat significant life events in the lives of family members or close friends as your cue to act. When a sibling suffers a stroke, a parent receives a serious diagnosis, a peer dies unexpectedly, or a relative becomes entangled in an impairing life-altering event, use that moment as the prompt to review, reconsider, update, and properly fund your own documents. These external events provide clear, low-pressure opportunities to make deliberate decisions while your capacity and judgment remain strong, avoiding the far greater risks that come with last-minute changes made under the cloud of your own failing health or another person's influence or coercion.

CONCLUSION

When families wait until after a stroke, a hospitalization, or a noticeable decline, they often create the very conditions that invite challenge. Once the dispute begins, control shifts from the family to the court system, and the system moves on its own unpredictable timeline.

The Corbett case is a useful reminder: the cost of litigation is not limited to attorney fees. It includes years of uncertainty, frozen assets, and emotional toll. The only winning move is to plan proactively: plan early, plan well, and make clear decisions while you still can.  If your estate plan (or a loved one’s) has not been reviewed in light of current health and family circumstances, now is the time. Waiting until after the next health event is often the most expensive choice of all.

Elderly Abuse Cases Rising In Ohio Nursing Homes

A recent news segment and accompanying investigative reporting have brought renewed attention to serious concerns about care quality at facilities operated by the Arbors of Ohio nursing home chain. The reporting highlights a pattern of regulatory violations, civil lawsuits, and, in some cases, findings that facility failures contributed to resident harm or death.

The Core Allegations

According to an investigation by Signal Ohio published in June 2026, the Arbors of Ohio chain has faced significant legal and regulatory pressure:

• Since January 1, 2024, at least 11 plaintiffs have filed lawsuits accusing Arbors facilities of negligence or medical errors that allegedly contributed to patients’ deaths.
• Federal and state inspectors have linked care failures at certain Arbors facilities to the deaths of residents.
• Over a recent three-year period, the Centers for Medicare & Medicaid Services (CMS) issued fines to Arbors facilities on 18 occasions, totaling more than $648,000.

The news segment discussing these findings also referenced broader data from the Ohio Attorney General’s office showing a substantial rise in reported elder-abuse cases, underscoring that problems in long-term care are not limited to a single chain.

Sharpening the Case for Aging-in-Place Planning

Stories like this reinforce several practical realities for older adults and their families:

• Regulatory fines and private lawsuits, while important, do not always prevent continued operation of facilities with repeated problems;
• Families cannot rely solely on a facility’s continued licensure as evidence of consistent high-quality care; and
• The best protection remains proactive planning that prioritizes home- and community-based options whenever feasible, thorough vetting of any institutional placement, and ongoing monitoring of care.

When institutional care becomes necessary, consider our article, "Choosing a Nursing Home or Skilled Nursing Facility: Navigating the Long-Term Care Crisis."  Families should always review recent inspection reports, staffing data, fine history, and complaint records before making a decision and should continue to monitor care after placement.

Proactive Planning

The reports concerning Arbors of Ohio facilities illustrate the ongoing risks that can arise in institutional long-term care settings. They also highlight the value of aging-in-place strategies, careful selection of any facility, and vigilance by family members. Public data from CMS, state health departments, and independent investigations remain essential tools for families trying to make informed decisions.  Families concerned about a loved one’s care should document issues, report them to the appropriate state agencies, and consult an elder law attorney when necessary to protect the resident’s rights and safety.

When an Estate Inherits an IRA: New IRS Guidance Allows Tax-Free Division into Separate Inherited IRAs

One of the most common and costly retirement-account mistakes is failing to identify beneficiaries on an IRA. When no beneficiary is designated (or the designation fails), the account passes to the decedent’s estate by default. That outcome usually produces worse required minimum distribution (RMD) rules and can create administrative headaches for the executor and the heirs. In PLR 202624001 (released February 20, 2026), the IRS confirmed a practical and taxpayer-friendly solution: an estate that inherits an IRA can divide the account into separate inherited IRAs for the individual beneficiaries named in the will, using trustee-to-trustee transfers, without triggering a taxable distribution.

The Facts of the RulingThe decedent owned a traditional IRA and died after reaching the age at which RMDs were required. No beneficiary designation was on file, so the estate became the sole beneficiary of the IRA. The decedent’s will left the residuary estate (including the IRA) equally to three children. 

The executor proposed to divide the IRA into three equal shares, and move each share by direct trustee-to-trustee transfer into a separate inherited IRA titled in the decedent’s name for the benefit of each child (as a beneficiary of the estate).  We'll discuss "why" the executor suggested this plan after reporting the ruling of the IRS.

What the IRS Ruled

The Service granted four favorable rulings.  The IRS ruled that:

• each beneficiary’s interest in the estate’s IRA may be segregated into separate IRAs for RMD purposes;

• the new accounts, properly titled and funded by trustee-to-trustee transfer, qualify as inherited IRAs under IRC § 408(d)(3);

• each beneficiary may take RMDs from his or her separate inherited IRA over the decedent’s remaining life expectancy (using the Single Life Table); and

• The trustee-to-trustee transfers themselves are not taxable distributions under § 408(d)(1) and are not treated as rollovers under § 408(d)(3).

In short, splitting the estate-owned IRA into separate inherited IRAs for the will beneficiaries does not create immediate income tax.

The Executor's Objectives

The main goals were administrative clarity, separate control, and cleaner tax reporting, while staying within the limited options available once the estate is the beneficiary.  Key benefits of the approved approach:

• Separate accounts for each beneficiary:  Each child receives their own inherited IRA. They can manage investments, take distributions, and deal with the custodian independently instead of everything flowing through the estate.
• Independent RMD tracking
  Each beneficiary satisfies the required minimum distribution rules from their own account. This avoids the need for the executor to calculate and distribute one combined RMD and then allocate it among the heirs.
• Avoids (or minimizes) estate-level income taxation
  When the IRA stays in the estate’s name, distributions are generally reported to the estate under its EIN. The estate may have to pay tax at compressed fiduciary rates if it retains the funds, or it must distribute the money out so the beneficiaries pick up the income. Splitting into separate inherited IRAs lets the income flow more directly to the individual beneficiaries.
• Non-taxable movement of the assets
  The IRS confirmed that the trustee-to-trustee transfers themselves are not taxable distributions and are not treated as rollovers. The tax is deferred until actual distributions are taken from the new inherited IRAs.
• Practical administration
  Once the separate inherited IRAs are established, the estate can close out its involvement with the retirement account more cleanly.

Note that the beneficiaries still had to use the decedent’s remaining life expectancy for RMDs. Because the estate (not the individuals) was the designated beneficiary, they could not use their own longer life expectancies or the more favorable 10-year rule that usually applies to designated individual beneficiaries.What If the Proposal Had Been Denied?

If the IRS had refused to allow the division into separate inherited IRAs, the practical and tax consequences would have been less favorable:

• The entire IRA would have remained titled in the name of the estate.
• All post-death distributions would be reported on Form 1099-R issued to the estate.
• The estate would include those amounts in its gross income (Form 1041).
  • If the estate retained the funds, it would pay tax at the compressed fiduciary income-tax rates (which reach the highest bracket very quickly).
  • If the estate distributed the money to the beneficiaries in the same year, the income could be passed out via Schedule K-1, but the timing and character still flow through the estate’s return first.
• The executor would have to continue administering the IRA as an estate asset, calculating the single RMD based on the decedent’s remaining life expectancy, and then allocating shares among the three children.
• Beneficiaries would have less direct control and more dependence on the estate administration process.
• There could be delays, extra accounting costs, and potential mismatches between when the estate receives the distribution and when the beneficiaries actually receive their shares.
• Alternately, the executor could have distributed the funds from the IRA, incurring immediate taxable consequences to either the estate or to the individual beneficiaries on the entire amount distributed, sacrificing any favorable tax deferral.

In short, the ruling gave the executor a clean, tax-free way to move from one estate-owned IRA to three separate inherited IRAs. That structure is administratively superior and generally more tax-efficient for the beneficiaries than leaving the account stuck inside the estate. It does not, however, improve the underlying RMD period; that limitation is locked in once the estate is the beneficiary. This is why proper beneficiary designations (or a qualifying look-through trust) remain far preferable to relying on this post-death rescue technique.

Why This Matters and Why It Is Still Second-BestThis guidance is helpful for executors who discover that an IRA has no designated beneficiary. It allows the estate to move the assets into individual inherited IRAs so each heir can manage his or her own share and satisfy RMDs independently.  The ruling, however, also underscores a critical limitation: because the estate was the beneficiary, the heirs are stuck with the decedent’s remaining life expectancy. They cannot use their own longer life expectancies, nor (in most post-SECURE Act cases) the more flexible 10-year rule that often applies to designated individual beneficiaries or qualifying look-through trusts. The result is typically faster forced distributions and higher income taxes over a shorter period.Planning Implications for Aging-in-Place and Elder Law ClientsThe following remain actionable and preferred planning tools:

• Name a Beneficiary:  A properly drafted see-through trust, but if not, an individual primary and contingent beneficiary or beneficiaries. The cleanest solution is still a direct beneficiary designation. This PLR is a rescue technique, not a preferred plan.

• Review Beneficiary Forms Regularly:  Marriage, divorce, births, deaths, and changes in relationships all require updates. Custodians’ default rules (often the estate) should never be left in place by accident.

• Coordinate the Will and Beneficiary Designations: Even when the will names the same people, the absence of a designation on the IRA form forces the slower, less favorable estate-as-beneficiary path.

• Executors should act promptly: Establishing the separate inherited IRAs and confirming the RMD method early reduces the risk of missed distributions or custodian resistance. Some custodians still prefer or require a PLR before allowing the split; this published ruling may ease that process.

• Consider the Income-tax Impact on the Heirs. Faster RMDs based on the decedent’s life expectancy can push beneficiaries into higher tax brackets, another reason to avoid estate-as-beneficiary status whenever possible.

Bottom Line

PLR 202624001 gives executors a clear, tax-free path to divide an estate-owned IRA into separate inherited IRAs for the individual heirs. That is welcome administrative relief. It does not, however, cure the underlying problem of a missing or failed beneficiary designation. The best protection remains proactive: keep beneficiary designations current, coordinate them with the overall estate plan, and avoid letting retirement accounts fall into the estate by default.

Clients who hold IRAs or other retirement accounts should review their beneficiary designations as part of any comprehensive aging-in-place or estate-planning update. A few minutes spent confirming those forms can save heirs both taxes and complications later.

Private Letter Ruling (PLR) 202624001 (released June 12, 2026).