Inherited Ira’s–Bankruptcy Protection


Last March, we discussed the bankruptcy case In re Chilton. That case held that unlike a traditional individual retirement account (IRA), an inherited IRA is not an exempt asset in bankruptcy. Our prior discussion can be read here.

That case has now been reversed. When Chilton was first decided, it was a case of first impression. Since then, there have been at least five other cases that ruled in an opposite manner. In reversing the bankruptcy court, the District Court held that (a) an inherited IRA holds “retirement funds” within the meaning of 11 U.S.C. §522(d)(12), and (b) such an IRA is tax exempt under Code §408(e). Thus, an inherited IRA qualifies as an exempt asset under 11 U.S.C. §522(d)(12).

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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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