Supreme Court rules that Inherited IRA’s provide no asset protection in Bankruptcy

The Supreme Court has ruled in the case of Clark v. Rameker that inherited IRA’s (i.e. and IRA/401k account that you receive from your parent’s estate) do not have the same creditor protection as an employer funded 401k or a self funded IRA.  As a result, the funds held in an inherited IRA’s can be attached by creditors in a bankruptcy proceeding.

This ruling should result in an increase in the use of an IRA Beneficiary Trust as a vehicle in which the inherited IRA can reside for the lifetime of your heirs and while the funds are held within the trust, it is unavailable to your heir’s creditors.