An Inherited IRA Is NOT Protected From Creditors in Bankruptcy!
Jul 01, 2014
For several years, there has been a divide among the courts nationwide as to whether or not IRAs that were inherited are protected from creditors or bankruptcy.
As of June 12, 2014, we definitively know the answer – and it isn’t an answer most of you will like. The answer, according to the U.S. Supreme Court in Clark v. Rameker is…NO, an inherited IRA is NOT protected from creditors in bankruptcy.
What are inherited IRAs? Here, we are talking all tax-deferred assets that are transferred to another person after death – except to a spouse. When I say “all tax deferred assets,” I mean IRA, 401k, 403b, IRA annuities, etc. A spouse doesn’t fall under this category because a spouse the one person entitled to actually directly roll over the other spouses IRA into their own (no, contrary to what you believe, your children are NOT allowed to do this! Children must set up...