Are Inherited IRAs Protected From Creditors?

Legal update: October 31, 2026

The inherited-account rules changed after this article was first published. The SECURE Act of 2019 generally replaced lifetime “stretch” distributions with a ten-year payout period for many beneficiaries of account owners who died after 2019. Exceptions remain for eligible designated beneficiaries. The Treasury regulations issued in 2024 apply beginning in 2025 and require annual distributions during that ten-year period in certain cases, including when the owner died on or after the required beginning date. Naming a trust does not automatically preserve lifetime withdrawals. See IRS beneficiary guidance and the 2024 final regulations.

An individual retirement account can be important both to your retirement and to the people who inherit it. Creditor protection and income-tax distribution rules are separate questions. The answer after an inheritance depends on the account, the beneficiary, the applicable law and, in bankruptcy, which exemptions are available.

This question became especially important after a 2014 U.S. Supreme Court ruling, and the answer depends in large part on where you live.

What Did the Supreme Court Decide About Inherited IRAs?

In Clark v. Rameker, 573 U.S. 122 (2014), the U.S. Supreme Court held that the nonspouse inherited IRA at issue did not qualify as “retirement funds” for the federal bankruptcy exemption in 11 U.S.C. § 522(b)(3)(C). The decision did not eliminate every protection available under state law or every other applicable exemption.

The Court highlighted three reasons why inherited IRAs differ from traditional retirement accounts:

• You cannot add money to an inherited IRA.
• Inherited accounts have distribution requirements that differ from an owner’s retirement account. Current timing depends on the beneficiary’s status, the owner’s date of death and whether required distributions had begun.
• Distributions following the owner’s death generally are not subject to the usual 10% early-distribution additional tax, although ordinary income tax may still apply.

These distinctions informed the Court’s analysis. They should not be read as a complete statement of today’s inherited-IRA tax rules, which changed substantially after the 2014 decision.

Are Spousal IRAs Treated Differently?

A surviving spouse can have options unavailable to a nonspouse beneficiary, including treating an eligible inherited IRA as the spouse’s own or making a permitted rollover. Requirements and tax consequences differ, including the treatment of required distributions and withdrawals before age 59½. A rollover should be evaluated rather than assumed to be best in every case.

However, this only applies to spousal rollovers. Non-spouse beneficiaries, such as children or grandchildren, cannot roll over an inherited IRA in the same way.

How Are Inherited IRAs Treated in Florida?

Florida Statutes section 222.21 protects qualifying retirement-account interests and expressly addresses qualifying transfers to inherited IRAs. That can provide protection separate from the federal retirement-funds exemption discussed in Clark. The statute has conditions and exceptions, and federal law may also affect a particular claim.

The deceased owner’s Florida residence does not automatically give every beneficiary Florida’s exemptions. The beneficiary’s applicable exemption law matters; bankruptcy rules include domicile timing and other requirements. A recent move to Florida does not by itself settle which exemption applies. For example:

• A beneficiary eligible to claim Florida’s applicable exemptions may receive protection under section 222.21.
• A beneficiary living elsewhere needs advice about the law applicable to that beneficiary, even if the deceased owner lived in Florida.

Can You Protect an Inherited IRA With a Trust?

A carefully designed trust may be named as beneficiary when continuing management or protection for the trust beneficiary is appropriate. The trust must be reviewed under retirement-account distribution rules; naming a trust does not itself create a lifetime tax deferral. Conduit and accumulation provisions can produce very different tax and creditor consequences.

A trust can also provide other benefits, such as:

• Coordinating withdrawals with the applicable distribution period. Many nonspouse beneficiaries of owners who died after 2019 face a ten-year deadline; annual distributions may also be required. Eligible designated beneficiaries and qualifying trust arrangements can have different rules.
• Controlling how and when beneficiaries receive distributions.
• Providing potential protection for assets retained in a properly designed trust, subject to creditor-law exceptions and the trust’s actual terms.
• Providing long-term planning for beneficiaries with supplemental needs.

How Can an Estate Planning Attorney Help?

Planning for how your retirement accounts will pass to loved ones requires careful thought. Clark addressed a particular federal bankruptcy exemption. The protections available to a beneficiary depend on the account and the applicable federal and state law. Florida law offers unique advantages, but beneficiaries in other states may be left exposed.

Verras Law can help coordinate estate plans with beneficiary designations, trust terms and your beneficiaries’ circumstances. We work with the appropriate tax or other counsel when a rollover, distribution deadline, creditor issue or another state’s law needs closer review.

Protect Your Family’s Inheritance

If you have questions about inherited retirement assets and creditor protection, I can help you review the available options and their limits in the context of your family’s plan.

Contact Verras Law to arrange a consultation.

Sources: Clark v. Rameker, 573 U.S. 122; Florida Statutes § 222.21; IRS Publication 590-B; 11 U.S.C. § 522.

Updated October 26, 2026.