Timothy J. Sierra, Attorney at Law Trusted Florida Bankruptcy Attorney Since 1987
Call Today For A Free Initial Consultation

Inherited IRAs are Not Considered "Retirement" Accounts

When a person sets up an Individual retirement account for themselves they usually are thinking that if something should happen to them, then their account is under the possession of the beneficiary of their choice. Which is true, however, when a person sets up an IRA with a chosen beneficiary do they think about if this account can be affected financially, such as through a bankruptcy. No, most IRA owners do not. This is because too many people who do have IRAs or have inherited those from an original owner never realize that if faced with bankruptcy their inherited IRA is at risk.

Individual Retirement Accounts are protected under the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005. However, recently a lot of controversy has been up for debate about whether this act applies to IRAs that are inherited.

The decision that an IRA that is inherited from its original owner loses its protection from bankruptcy has been made recently by the Supreme Court for many reasons; one of which is that they feel that inherited IRAs do not have the same characteristics of a "retirement" account. Such characteristics of inherited IRAs are:

· Beneficiaries cannot add money to inherited IRAs, where original owners of an IRA are free to do so as they please.

· Inherited IRAs require minimum distributions to start within a year of the inheritance, no matter how many years that beneficiary is from retirement.

· Inheritors of the account can take out as many distributions whenever they want, where IRA owners usually need to wait until they are 59 ½ before beginning to take out a distribution from the account without penalty.

It is important to keep in mind that this Supreme Court decision applies to inherited IRAs that have beneficiaries other than the original owner's spouse.

Florida debtors need to be aware that inherited IRA's may be claimed as exempt under Florida Statute 222.21(2)(c) as that statute has been recently amended to clarify existing law regarding the exemption of inherited IRA'S. However, the legislature then left the requirement that the inherited IRA still be maintained in accordance with a plan or governing instrument that has been determined by the Internal Revenue Service to be exempt from taxation under s. 401(a), s. 403(a), s. 403(b), s. 408, s. 408A, s. 409, s. 414, s. 457(b), or s. 501(a) of the Internal Revenue Code of 1986. There are no reported decisions regarding the amended statute. Therefore, the creditors may not let this one pass without a challenge.

From this recent debate many beneficiaries of inherited IRAs who are at risk of facing a bankruptcy can be largely affected. To protect your own retirement account from bankruptcy, one should consider naming a trust as their IRA beneficiary. In doing this it gives your heirs better protection of savings against bankruptcy. However, you need to consider many factors before moving forward and finding a trust. The size of your IRA and how likely it is that your beneficiaries will run into problems with creditors or face a bankruptcy, are issues to think about before making a decision.

To help make your decision, if need be, a less stressful one you should contact an attorney experienced with handling Individual Retirement Accounts and who has knowledge of bankruptcies. In taking these steps and precautions you can protect your wealth and know that your loved ones will be taken care of, if something should happen.

Work Cited:

Ed Slott and Company - IRA, Tax, Retirement Planning Articles, Insight (Supreme Court: Inherited IRAs are NOT Retirement Accounts ... and What This Means For You ~)


No Comments

Leave a comment
Comment Information
  • "When I first came to the decision to file for bankruptcy, I had no idea where to start. I began researching attorneys on the internet and came across the information for Tim Sierra. Since he specialized in bankruptcy and had a lot of experience......"
  • The process of going through bankruptcy could be very overwhelming but Tim made me feel at ease and I felt that my needs were being taken care of. I truly feel that he had my best interests in mind and the lines of communication were always open....
  • "I had to file a Chapter 7 bankruptcy. I didn't know anyone who could refer someone so I took a chance and just looked on the Internet. I don't remember exactly why I chose Mr. Sierra, but I am glad I did..."
  • He was honest, straightforward, and hard-working. In my case I ended up with some extenuating circumstances and he handled the matter professionally even though I'm sure the work probably exceeded what he originally felt it would be....
  • I don't ever write reviews, and I had no prior relationship with Mr. Sierra. This review is simply being written as a service to others that Mr. Sierra is an excellent attorney and should be considered for your needs if you need one....
  • "I'm very happy to have been referred to Tim for my Chapter 7 filing. He was knowledgeable in his field and very responsive in replying to any questions or concerns I had. Tim was also very accommodating with meeting times..."
  • " I recently was in need of Mr. Sierra's services and I found him to be very understanding and helpful in my particular circumstance. He met with me and explained everything in full detail and also answered every question that I had....."
  • " I recommend Timothy Sierra a loyal and dependable lawyer. When you talk to him you feel that you are with a friend or a member of your family. Timothy is able to lead you in every step of the process. Good job Timothy."
  • " Bankruptcy is a private and personally devastating life event. Timothy Sierra and his assistant, Nancy, made the process as painless as possible. They kept in close contact via phone and email so I always knew what was happening in my case...."
More Testimonials
Email Us Today

Schedule A Free Initial Consultation To talk to an experienced Tampa bankruptcy attorney, call 877-492-7449 or fill out the form. All calls are returned within 24 hours.

Bold labels are required.

Contact Information

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.


Privacy Policy

We Have Offices in Tampa, Riverview and Brandon For Your Convenience.

Tampa Office
118 South Rome Avenue
Tampa, FL 33606

Toll Free: 877-492-7449
Toll Free: 877-492-7449
Phone: 813-463-2256
Phone: 813-463-2256
Fax: 813-258-4746
Tampa Law Office Map

Riverview Office
6314 U.S. Highway 301 South
Riverview, FL 33578

Toll Free: 877-492-7449
Toll Free: 877-492-7449
Phone: 813-463-2256
Phone: 813-463-2256
Fax: 813-258-4746
Map & Directions

Brandon Office
305 North Parsons Avenue
Brandon, FL 33510

Toll Free: 877-492-7449
Toll Free: 877-492-7449
Phone: 813-463-2256
Phone: 813-463-2256
Fax: 813-258-4746
Map & Directions