We Have All The Tools Necessary To Help You

Request A Consultation 646-561-9099 Contact Us For A Complimentary Consultation
View Our Practice Areas

Can you prevent an inherited IRA from being lost in bankruptcy?

People in the midst of creating an estate plan understand that the ultimate goal is to provide for others (especially vulnerable adults and children) when they are no longer able to do so. But part of the difficulty of estate planning is that the future cannot be predicted.

Nevertheless, savvy people can merge their generosity with their beliefs to create best-case and worst-case scenarios so that options remain available to deal with unanticipated circumstances. 

Despite all the planning, one of the most vexing questions a testator must consider is the future financial condition of a beneficiary. This is especially important given the U.S. Supreme Court’s 2014 decision on the classification of inherited IRAs. Basically, the court ruled that such an asset could not be considered exempt under federal bankruptcy laws. So if a person who sought bankruptcy protection soon after inherited a loved one’s IRA, it would be considered part of the bankruptcy estate, and could be subject to liquidation to pay the person’s outstanding debts. 

The ruling was a stark contrast compared to previous federal court rulings, which basically held that an inherited IRA was the same as any other IRA in that it could not be considered an asset of the bankruptcy estate. Basically, these accounts are protected under the bankruptcy code because they are designed not to be used until retirement, absent very limited circumstances.

In light of this change, there are several ways to prevent inherited IRAs from being lost in bankruptcy. An experienced estate planning attorney can give you some options. 

No Comments

Leave a comment
Comment Information
Email Us For A Response

We Can Help

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Privacy Policy

Office Address

Busson & Sikorski, PC
381 Park Avenue South
Suite 615
New York, NY 10016-8806

Phone: 646-561-9099
Fax: 646-365-5323
Map & Directions