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Inherited IRA's Not Protected in Bankruptcy

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    Inherited IRA's Not Protected in Bankruptcy

    A notice from an estate planning firm I deal with has advised, due to a recent Supreme Court decision -- Clark vs Rameker, that inherited IRA's are not immune from creditors as they are not considered true "retirement funds" and therefore are not protected under federal bankruptcy law. Plenty of my clients have these, as their parents, siblings etc never used up all of theirs (if any).

    #2
    If I recall correctly, Traditional and Roth IRA's over the exempt amount (around $1.2M) were not protected in bankruptcy?
    Taxes after all are the dues that we pay for the privileges of membership in an organized society. - FDR

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      #3
      Yes. The asset limit is $1,245,475 aggregated (all traditional and ROTH IRA's.) Income paid out is not protected, except for certain amts needed for support under Chapter 7. However, none of these exceptions apply to inherited IRA's unless they are in a specific qualifying trust. Inherited IRA's can be withdrawn at any time, and are not subject to any penalties on the income received, no further contributions can be made to them, and they are therefore not considered traditional retirement funds for the successive beneficiary(ies) according to the 9-0 court decision.
      Last edited by Burke; 11-10-2014, 02:18 PM.

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