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It’s Time To Reconsider IRA Beneficiaries

Have you named your children as beneficiaries of your IRA? Perhaps it is time to re-think that decision.

A recent United States Supreme Court ruling raises concerns about asset protection and the designation of IRA beneficiaries. In June the high court unanimously ruled that, under federal law, an IRA that is owned by a beneficiary is not protected in bankruptcy. The ruling does not affect the bankruptcy protection from creditor claims of an individual’s IRA. Rather, it exempts from bankruptcy protection any IRA that has been inherited. This means that IRAs that are transferred by an IRA beneficiary after the IRA owner’s death to an IRA in the beneficiary’s name could be lost to creditors’ claims if the beneficiary files for bankruptcy.

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