Q: I have an IRA account that belonged to my son that I'm a beneficiary of. Unfortunately, my son passed away. And, a financial adviser advised me to transfer this IRA to my IRA account that's already in existence. Unfortunately, I may be forced to file Chapter 7 in New York in the near future. Will I be able to exempt the inherited IRA in addition to my IRA account?
A: This issue should definitely be discussed with a bankruptcy attorney in your area; as the answer may depend on your jurisdiction. Generally, your IRA accounts are fully exempt. However, inherited IRAs are a different story depending on the jurisdiction. Recently, the 5th Circuit Court of Appeals held that these IRAs are exempt under the Federal Exemptions. However, other states that require debtors to use state exemptions may not allow for an exemption of this type. In fact, New York is not in the 5th Circuit. But, I believe it does allow for use of the Federal Exemptions so you may be in the clear. Again, you should contact a local bankruptcy attorney who knows how a New York bankruptcy court will treat this asset.
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