Inherited IRAs Are Exempt According To Federal Appellate Court
Last August I published a post about a Florida state appellate court decision holding that inherited IRAs are not exempt from creditors. The Florida court held that Florida Statute 222.21(a) is intended to protect only IRA funds which the debtor himself contributed to an IRA from his own earnings and for his own retirement, and that IRAs inherited from another family member (other than a spouse) where not exempt under the Florida statute.
I read a blog post by Missouri bankruptcy attorney Wendell Sherk reporting on a decision by a federal appeals court for the eighth circuit wherein the federal court reached a contrary conclusion. The federal court held that under federal bankruptcy law there should be no distinction between an inherited IRA and the debtor’s own IRA. According to Mr. Sherk, this court decided that bankruptcy law protects all " retirement funds" and does not require that they specifically have been funded by the debtor with his or her own funds. The case is : In re Nessa ___ B.R. ___, #10-6009, (8th Cir.BAP 4/9/10)
The Florida state court and the federal appeals court interpreted different laws. The Florida court considered a Florida statute and the federal court looked at the inherited IRAs under federal bankruptcy law. Nevertheless, the eighth circuit federal court decision provides a strong argument in favor of inherited IRA protection should the issue come up in a Florida state court or a Florida bankruptcy court.
