Conflating tax law and trust law: The strange case of Ciampa v. Bank of America.

Charles E. Rounds, Jr. - Suffolk University Law School
Contact

Under the Internal Revenue Code, an Individual Retirement Account (IRA) may be a trust. See 26 U.S. Code § 408(a). Or it may be a custodianship. See sub-section (h) to §408. Here is sub-section (h) verbatim:

FOR PURPOSES OF THIS SECTION, a custodial account shall be treated as a trust if the assets of such account are held by a bank (as defined in subsection (n)) or another person who demonstrates, to the satisfaction of the Secretary, that the manner in which he will administer the account will be consistent with the requirements of this section, and if the custodial account would, except for the fact that it is not a trust, constitute an individual retirement account described in subsection (a). For purposes of this title, in the case of a custodial account treated as a trust by reason of the preceding sentence, the custodian of such account shall be treated as the trustee thereof.

I have always taken sub-section (h) to mean that a custodial IRA shall be deemed a trust merely for tax purposes. Otherwise, the common law of agency generally applies, with one critical exception: By state statute postmortem beneficiary designations are now generally enforceable. Now comes Ciampa v. Bank of America (Mass. App. Court-Aug. 13, 2015), which seems to suggest that whether an IRA is an agency or a trust for state law purposes is governed by the Internal Revenue Code, and, thus, all IRAs are trusts. The Court then then proceeds to impose a resulting trust on the assets of what I assume, perhaps mistakenly, to be a custodial IRA. Very strange. Here is a link to the case:

http://scholar.google.com/scholar_case?case=2257923728575014031&q=Ciampa+v.+Bank+of+America&hl=en&as_sdt=40000006&as_vis=1.

For an extensive discussion of general resulting trust doctrine, see §4.1.1.1 of Loring and Rounds: A Trustee’s Handbook [pages 252-270 of the 2015 Edition]. (The Resulting Trust and the Equitable Reversionary Interest: A General Discussion). The custodial IRA is taken up in §9.8.4 of the Handbook [page 1491 of the 2015 Edition]. This section of the Handbook is reproduced in its entirety below.

Charles E. Rounds, Jr.

Please see full publication below for more information.

LOADING PDF: If there are any problems, click here to download the file.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Charles E. Rounds, Jr. - Suffolk University Law School | Attorney Advertising

Written by:

Charles E. Rounds, Jr. - Suffolk University Law School
Contact
more
less

Charles E. Rounds, Jr. - Suffolk University Law School on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide