INHERITED IRA IS NOT CREDITOR – PROTECTED IN FLORIDA

          In the recent decision of Robertson v Deeb, 2009 Fla. App. LEXIS 11322 (Fla. 2d DCA August 14, 2009), the Court held that an inherited IRA is not protected from creditors under Florida law.  Although an IRA ordinarily is exempt from legal processes under Florida Statute § 222.21, the Court held that an “inherited” IRA is not entitled to the exemption because that section is limited to the “original fund or account”.  The Court reasoned that once an IRA was inherited, it became a separate fund or account after the original fund or account passed to a beneficiary upon the death of the participant.

          This decision illustrates why we often recommend that clients name trusts as beneficiaries of IRA’s, so that the creditor protections of the IRA can be extended to future generations.