Inherited IRAs and Medical Debt

Submitted by Andrew Cochran on Wed, 2023-05-03 17:49

I have a client who is the named beneficiary for three accounts of his now deceased sister. She passed away in 2022. She had the following accounts:

Maryland State Retirement Plan
Traditional IRA
Roth IRA

Maryland State Retirement Plan instructions are to transfer the assets to a beneficiary IRA.

Decedent was a resident of Washington D.C. There is about $300,000 in medical debt than the decedent left behind. As I understand it (and as did an estate planning attorney I’ve consulted with, my compliance officer, and legal team), since there was a named beneficiary on all 3 accounts these are protected from the decdent’s creditors including the medical bills owed. Am I correct in this assessment.



Submitted by William Tuttle on Wed, 2023-05-03 18:13

  • On June 12, 2014, the U.S. Supreme Court ruled that an inherited IRA is not a federally asset protected retirement account.
  • Any protection will be that provided by Washington D.C. law.
  • Only a small number of states have added state protection to inherited IRAs. I do not know if D.C. has done so.

Submitted by Andrew Cochran on Wed, 2023-05-03 18:20

I understand that once the client has the inherited IRA it is not protected from his creditors. However his sisters accounts were protected from creditors as they were not inherited accounts. Correct?

Submitted by Andrew Cochran on Wed, 2023-05-03 18:20

I understand that once the client has the inherited IRA it is not protected from his creditors. However his sisters accounts were protected from creditors as they were not inherited accounts. Correct?

Submitted by William Tuttle on Wed, 2023-05-03 23:22

  • Once she died, they are no longer considered retirement accounts with federal asset protection. Absent state protection, a creditor could assess a claim against the estate.
  • IANAL, as I said this will be determined by D.C. law, court precedence and maybe your case.
  • Only about 25% of states have enacted specific asset protection for inherited retirement accounts since the SCOTUS ruling.
  • I don’t know if this includes D.C. or if there is precedence one way or the other.
  • Many states and maybe are in limbo without any specific protection or precedence.
  • Without your “legal” team coming forward with specific D.C. protection for inherited retirement accounts or precedence since the SCOTUS ruling.
  • Anything else is conjecture that an anonymous internet forum can not answer.

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