Protecting Inherited Individual Retirements AccountsProtecting Inherited Individual Retirements Accounts
What happens if the IRA beneficiary goes bankrupt?
April 11, 2013
While the bankruptcy protection afforded to contributory and rollover individual retirement accounts is clear, the protection given to inherited IRAs isn’t as well defined. As of mid-2011, nearly 40 percent of U.S. households owned at least one type of IRA,1 making the ability to protect such assets an important issue to many clients.
Bankruptcy Basics
There are generally two types of bankruptcy filings available to individuals: Chapter 7 and Chapter 13. Both are governed by the federal Bankruptcy Code, which is codified as Title 11 of the United States Code.
Chapter 7 involves the liquidation of the assets consisting of the bankruptcy estate. To qualify for a Chapter 7 filing, the debtor must satisfy a means test as outlined in the Bankr...
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