Supreme Court Decision: Inherited IRA NOT Protected

A recent decision from the Supreme Court means there’s no better time than now to review your estate plans and ensure that you have identified the best possible solution for passing down assets to another generation. This new ruling states that inherited IRA funds DO NOT QUALIFY under the category of “retirement funds” under bankruptcy exemption guidelines. Previously, these kinds of funds might have been considered “bulletproof” from creditors, but this new ruling means it could be time to re-evaluate how you’re transferring your assets down to children and other beneficiaries. Is a Standalone Retirement Trust or IRA Trust right for me?

(Photo Credit: baltimoretimes-online.com)

According to the Supreme Court, the members of which conducted reviews of the Bankruptcy Code to get more specifics on the situation, inherited IRAs should not count as retirement funds because the individual inheriting the assets cannot contribute to the funds or invest more money into them. Since the IRA also requires that the accountholder draw money from the account, the Supreme Court argued that this would “undermine the purpose of the Bankruptcy Code”.