If you have a large Individual Retirement Account (IRA) that you plan to leave to your kids or grandkids be sure they are in good shape financially. Even though their own IRA may be protected from the claims of creditors an inherited IRA is not.
If they inherit an IRA and then file bankruptcy the Inherited IRA may not be considered an exempt asset and could be lost to creditors. The Supreme Court has ruled that Inherited IRAs are not protected under federal bankruptcy laws. Be sure to discuss this with your financial advisor and estate planning attorney to see that you have done the right thing when you name beneficiaries for your IRAs. State laws vary so it is important to deal with an attorney and advisor who knows the rules of the state in which your beneficiaries live.
About the Author: C. Thomas Thames is a Certified Financial Planner™ professional and registered tax preparer with offices in Folsom and Woodbridge, California. Tom holds an MBA degree from Santa Clara University and has over 30 years experience in the financial services industry.