Inheriting an IRA

inheriting an ira

In this edition of “Dollars and Sense”, Jim Byrd from Safe Harbor Financial joins us to talk about Inheriting an IRA.

Below is a look at some of the questions and answers discussed on Studio10.

 1. What do you do if you receive and Inherited IRA from the death of a family member?

In a recent case a couple inherited a$300,000.00 inherited IRA when the spouses’ mother died. The couple filed for bankruptcy. The judge ruled that the inherited IRA was not a retirement fund and therefore was not exempt from claims of the creditors. The court ruled that an asset is a retirement fund only when held for the owner’s retirement. The federal courts reversed the Bankruptcy courts ruling stating that any money representing retirement funds in the decedent’s hands must be treated the same way in the beneficiary’s hands.

 2. How did filing for bankruptcy effect the courts decision?

The appeals court said that by the time the couple filed for bankruptcy, the money in the inherited IRA”did not represent anyone’s retirement funds.” The court went on to say that because the beneficiary has the ability to withdraw the money and use it for any purpose she chooses, including current consumption, it should not be withheld from creditors.

 3. Do Inherited IRA have a specific exemption under Bankruptcy codes?

No. Inherited IRA’s do not qualify because they are not reserved for use after the beneficiary’s retirement but may instead be withdrawn at anytime.

 4. Where should someone contemplating bankruptcy go?

A person contemplating bankruptcy should get the opinion of a qualified bankruptcy attorney in his or her own jurisdiction as to obtain how inherited IRAs are treated.

 About Jim Byrd and Safe Harbor Financial

Jim offers a free comprehensive financial review of your portfolio.  Safe Harbor can offer advice from a trustworthy and reputable attorney, and a CPA for tax questions and planning.

Safe Harbor Financial Services
9056 Merritt Lane
Daphne, AL

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