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Bankruptcy and inherited IRA exemption


While an IRA is likely exempt from the clutches of creditors during a bankruptcy proceeding, the status of an inherited IRA is largely up to the discretion of the overseeing court. Florida law clearly states that an IRA is exempt from the liquidation process during a chapter 7 bankruptcy, which means that filing for Chapter 7 bankruptcy will not force the debtor to relinquish his accumulated retirement savings. The law moves into the gray area when the IRA in question is of the inherited nature. An inherited IRA is created when a person dies and passes their savings onto a beneficiary. If that beneficiary declares bankruptcy, the inherited IRA may or may not be exempt.

Whether an inherited IRA is accessible to a bankruptcy debtor’s creditors is not yet clear based on the results of previous cases.  In Clark v. Rameker, the U.S. Supreme Court ruled that an inherited IRA are not retirement funds and therefore not exempt property. Some argue in Florida that the Supreme Court ruling fails to overturn existing state law, one that asserts that an inherited IRA account is exempt property under Florida state law exemptions.

If you are intertwined in a bankruptcy situation and wondering about the status of your IRA account, it is extremely wise to contact a reputable bankruptcy lawyer in West Palm Beach, before moving any further with any legal proceedings. Consulting with an expert in the bankruptcy field will allow you to ensure that the steps you take moving forward are appropriate according to the specifics of your situation. At Kelley Kaplan & Eller, our attorneys are well versed in many different facets of bankruptcy law, and are ready to put our expertise to work for you today. We invite you to schedule an appointment and let us get further acquainted with your individual bankruptcy case today.

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