Fifth Circuit Rules that Inherited IRAs Are Exempt under Code

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Originally posted in the ABI Journal, Vol. XXXI, No. 5, June 2012.

Editor’s Note: For additional perspective on inherited IRAs, read the May 2011 cover article and a letter to the editor published in the July/August 2011 issue.

On March 12, 2012, the Fifth Circuit Court of Appeals issued its decision in In re Chilton, affirming a judgment from the U.S. District Court for the Eastern District of Texas and holding that inherited individual retirement account (IRA) funds are exempt from the bankruptcy estate pursuant to 11 U.S.C. § 522(d)(12). The ruling was the first of its kind at the circuit court of appeals level, addressing an issue of first impression that bankruptcy and district courts have grappled with of late, and stands to help clarify the difference of opinion among the courts regarding Bankruptcy Code exemptions for inherited IRAs.

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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.

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