In today’s episode of Adam Talks, Adam Bergman, Esq. discusses a new bankruptcy case regarding co-mingling IRA funds and the loss of the IRA exemption from creditors.
Important IRA Creditor Protection Case
On this episode, IRA Financial’s Adam Bergman discusses the Langston case, which serves as a cautionary tale about the importance of following IRS rules and seeking expert advice when managing retirement funds. The case revolves around a Self-Directed IRA LLC managed by the debtor, who made the mistake of commingling funds from personal and IRA accounts, violating prohibited transaction rules and jeopardizing the IRA’s creditor protection exemption. The bankruptcy court ruled that the debtor’s IRAs were subject to creditor attack due to these prohibited transactions.
The debtor argued that the transactions were re-contributions to the IRA, but the court found no evidence of proper reporting or going through the custodian, leading to the rejection of this argument. The court analyzed the relevant IRS rules and concluded that the debtor’s IRAs were not protected because the debtor and his spouse controlled the disqualified entity, Langston LP. As a result, the debtor’s IRAs became vulnerable to creditor claims.
This case highlights the risks of losing creditor protection through prohibited transactions. It serves as a reminder to work with companies, like IRA Financial, that provide consulting services to navigate the complex rules surrounding Self-Directed IRAs and avoid severe financial consequences. Bergman emphasizes the need to consult experts who can explain the rules and provide guidance on avoiding prohibited transactions.
The Langston case further emphasizes the importance of asking questions and seeking advice to avoid similar situations. Bergman stresses the need to follow IRS guidelines and work with tax professionals to ensure compliance and protect LLC assets. He highlights his team of experts and annual consulting services as a means to protect clients through IRS inquiries and safely unlock retirement funds. Bergman expresses gratitude to the audience and encourage engagement through comments and questions.
Overall, this episode underscores the significance of expert guidance, compliance with IRS rules, and avoiding prohibited transactions to protect IRA assets and avoid the adverse consequences faced by the debtor in the Langston case. One of the major benefits of the Self-Directed IRA LLC is the strong asset and creditor protection. Without it, your hard-earned funds are open for attack.
