Taxation & Estate Planning

INHERITED IRA?S?BANKRUPTCY PROTECTION

By Charles Rubin

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)

Full post as published by Rubin on Tax on March 28, 2011 (boomark / email).