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Wednesday, October 21, 2009


In an interesting creditor protection case, Florida's Second District Court of Appeals held that an "inherited IRA" is not subject to creditor protection under Florida law, unlike regular IRAs that are held for the original owner/participant. In the case, an individual inherited his father's IRA. A creditor of the new beneficiary sought to garnish the IRA account.

Fla.Stats. §222.21(2)(a) generally exempts from the reach of creditors of a participant/beneficiary assets owned in an IRA that are being held for such beneficiary. Finding that IRAs that are "inherited" from a decedent are factually different from a tax exemption standpoint from IRAs held for the original funding participant, the Court held Fla.Stats. §222.21(2)(a) inapplicable. Thus, the creditor of the beneficiary of the IRA could garnish its assets.

Personally, I don't believe the statute supports such a distinction between inherited and regular IRAs since both IRAs provide a continuing income tax exemption during their remaining term - but of course my opinion has no legal significance. The court appeared to be heavily influenced by several federal bankruptcy court decisions that likewise concluded that inherited IRAs did not receive creditor protection under similar statutes in other states and under the federal Bankruptcy Code.

Robertson v. Deeb and RBC Wealth Management, 2nd DCA, Case No. 2D08-6428 (August 14, 2009)

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