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Are Inherited IRAs Protected from Creditors?

Illinois as well as Federal Bankruptcy Law protects IRAs from creditors.  With the advent of inherited IRAs, whether creditor protection extends to these assets is far from clear.  There continue to be conflicting cases throughout the nation.  In a recent Texas case, the bankruptcy court determined that the IRA inherited by the debtor from his mother was not the equivalent of an IRA and consequently not creditor protected. In re Chilton, No. 08-43414 (Bankr. E. D. Tax. Mar. 5, 2010)    A Minnesota bankruptcy court found the opposite-that inherited IRAs were protected from the debtor’s creditors.   In re Nessa, No. BKY 09-60081 (Bankr. D. Minn. Jan 11, 2010)

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