Is your inherited IRA protected from creditors? Estate Planning Attorney Erik Hartstrom Explains

ELK GROVE, Calif. - July 15, 2013 - PRLog -- Federal courts recently have had to consider whether IRA’s received from someone other than a spouse are protected from creditors under the Bankruptcy Code.  The most recent case, Rameker v. Clark, Nos. 12-1241 & 12-1255 (7^th Cir. April 23, 2013) held that Wisconsin resident Heidi Heffron-Clark’s inherited IRA worth $300,000 was available to her creditors.

“This was a devastating result for her, and definitely not what her mother envisioned when leaving her lifetime savings to her daughter” stated California estate planning attorney Erik Hartstrom.  He added, “The good news is this: if you are planning on leaving your IRA to your children, or other beneficiaries, there are ways of providing creditor protection with some advanced estate planning.”

Here in California the Ninth Circuit has yet to take up the question, and it is anyone’s guess what they will hold should the question come up.  “The risk to the beneficiaries of your inherited IRA is that a creditor will take this ruling and try to collect from your beneficiary” noted Hartstrom.  “Until the Supreme Court takes up the matter all beneficiaries in California are at risk.  Anyone planning on leaving IRAs to children should consult with their estate planning attorney on ways to protect their gift” he concluded.