Inherited IRA Asset Protection in California
I believe IRAs get protection from creditors for up to $1MM. In California, do Inherited IRAs receive any such protection. There have been two conflicting court cases with regards to this issue recently, but both were in different states. Does anyone have any knowledge with regards to this matter, or can you offer a resource. Any responses are appreciated.
California CFP 8)
Permalink Submitted by Alan Spross on Sat, 2010-06-05 00:44
With the current state of evolving litigation in retirement account creditor protection, I would not want to hazard a guess here. However, since CA has opted out of the federal BK protections in favor of state law, and CA state law only provides a subjective amount of protection equal to basic living costs for OWNED IRAs, it would be unlikely that a court would find that inherited IRAs carry even that much protection. Following is a link to an article about creditor protection of inherited IRAs coming under assault in certain states:
http://www.ncestateplanningblog.com/2007/07/articles/iras/inherited-ira-…
In addition, am also attaching a link to an asset protection site. When you scroll down to CA, note footnotes 1 and 2 regarding the opt out conditions in the CA code as well as an explanation of how the courts might decide what amounts are protected for the sustenance of the IRA owner.
I am not aware of any specific decisions regarding inherited IRA creditor protection in CA, but the combination of above sources appears to make such protection unlikely or extremely limited.
http://www.creditorexemption.com/