“Monday, March 28, 2011
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).
Chilton v. Moser, 107 AFTR 2d 2011-XXXX, 2011 WL 938310 (2011, DC TX)”
I found the above article and thought you might like to read this. It won’t apply to a lot of you but for those of you who do, the discussion could be valuable.
More Rules on IRAs, Roth IRAs and Educational Savings Plans.
If you have an Educational Individual Retirement Account or a 529 educational savings plan, any amounts placed in the account within 365 days prior to filing your case can be impounded by your bankruptcy trustee.
And if you have one of those plans, then all amounts deposited between 365 days and 720 days is limited to $5000 that you can protect. If you put $10,000 in during that one to two years ago, then the Trustee could take anything over the first $5000.
So, it is very important what kind of IRA you have.
Traditional, Self Employed or SEP IRAs and Simple IRA s are going to be fine. Have a look at the Code.