Bankruptcy Protection and Inherited IRAs: Today’s Slott Report Mailbag

Thursday, March 20, 2025

By Andy Ives, CFP®, AIF®
IRA Analyst

QUESTION:

I cannot find the indexed number for IRA bankruptcy protection for 2025-2028. It is $1,512,350 currently, but it is scheduled to increase on April 1, 2025. Do you know what it will be?

Mike

ANSWER:

The updated IRA bankruptcy protection number is $1,711,975, effective April 1, 2025. As you mentioned, this level of bankruptcy protection for IRAs will be in effect for the next three years. Note that the $1,711,975 does NOT include former plan dollars rolled into the IRA – like from a 401(k). Former plan dollars remain 100% protected from bankruptcy within the IRA and do not eat into the $1,711,975 cap.

QUESTION:

I inherited my brother’s Roth IRA in 2018 and take required minimum distributions (RMDs).

Under the SECURE Act, does the beneficiary I name on this account continue taking RMDs based on my schedule? If so, do they do so for 10 years and then empty the account in year 10?

Or, do they not have to take any distributions until year 10?

Thank you.

Donna

ANSWER:

Donna,

The beneficiary of your inherited Roth IRA is a successor beneficiary. Since you are already taking RMDs, those annual payments cannot be stopped by the successor. The IRS rules dictate that the successor will “step into your shoes” and continue with your exact same RMD schedule, using your same single life expectancy factor, minus one each year. Additionally, the successor beneficiary must also abide by the added layer of the 10-year rule. So, RMDs must continue in years 1 – 9 for the successor, and the account must be emptied by the end of year 10.

If you have technical questions you would like to have answered, be sure to submit them to [email protected], to be answered on an upcoming Slott Report Mailbag, published every Thursday.

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