Under Maryland law, your retirement account is not an available asset to your creditors. However, when you leave your retirement account to the next generation, the law is much murkier on whether that inherited account will be shielded from the beneficiary’s creditors, and depending on what state the beneficiary resides in, the entire account may be exposed once it’s inherited.

The solution is to leave the account to a “spendthrift trust” for the beneficiary. While inherited IRAs require the beneficiary to take a minimum distribution every year, the principal balance of the account will still be titled in the trust and should be shielded from the beneficiary’s creditors under Maryland spendthrift law.

If you are concerned about the downstream creditor protection for your retirement accounts, you should coordinate with an estate planning attorney to draft a trust agreement and with the account provider to ensure that the beneficiary designation correctly directs the asset into the trust at your death.

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