Need Help!! Is a Beneficiary ira safe from ch7

[Goodgrief]

Hey folks, I found out my inheritance is in the form of a "beneficiary Ira". Does any one know for a fact (100%) if that is safe (bullet proof) from a ch7 bk?

I am trying to find out if it is eligible as a nonspousal roll over into a regular IRA. I am about 80% certain it is, but I am still digging into that.

Again you folks have been great and have helped me out a bunch, but in this case I am trying to be 100% certain. Yes I am seeking a cpa in my area that knows the answers also. I will be so happy if it is!!

[optimistic1]

It is still an IRA, and under the code, it is exempt, although local courts may rule differently on the specifics, some may say it is not exempt, most likely though, I think you wont know unless you try to file, or if you have a really smart attorney, who is willing to fight.

Take this particular case in point.






Beginning January 1, 2008, non-spouse beneficiaries finally will be able to take advantage of the PPA 2006 provisions and roll over from a qualified plan into an Inherited IRA. In the Inherited IRA, the non-spouse beneficiary can use his or her own life expectancy to determine annual required minimum distributions (RMDs). This can significantly reduce the amount that the beneficiary must withdraw each year, thereby deferring income tax and allowing the account balance to continue to grow income tax free.

Implementation of a non-spouse rollover raises numerous pitfalls for the unwary. These pitfalls are identified in the Planning Tips that follow.

Planning Tip: The transfer must be DIRECTLY from the plan Trustee to the Inherited IRA's Custodian or Trustee.

Planning Tip: Any distribution to a non-spouse beneficiary is a taxable distribution, subject to income tax. Therefore any check delivered by the plan Trustee MUST be made payable directly to the Inherited IRA Custodian or Trustee.

Planning Tip: Unlike with a surviving spouse rollover, the Inherited IRA must remain in the name of the deceased participant. The Inherited IRA should be titled like this: Account Holder, deceased, IRA f/b/o Beneficiary.

Planning Tip: DO NOT re-title the qualified plan in the name of the non-spouse beneficiary. That will be treated as a taxable distribution.

Planning Tip: DO NOT transfer from the qualified plan to an existing IRA in the non-spouse beneficiary's name. That, too, constitutes a taxable distribution of the entire account.

Planning Tip: A non-spouse beneficiary must begin taking required minimum distributions from the Inherited IRA by December 31 of the year following the year of the participant's death. Note: This is different from a spouse rollover, where the surviving spouse can defer required minimum distributions until attaining age 70 1/2.
Planning Opportunities

The IRS's change of position means that additional planning options are now available for non-spouse beneficiaries of qualified plans. These options include those listed below, which were outlined in greater detail in a prior issue of The Wealth Counselor:

* Name a Retirement Trust as beneficiary to ensure the longest term payout possible, while also ensuring consistent account management - in the manner desired by the client using the client's advisors - oftentimes over generations.
* Give the accounts to charity at death and replace with insurance owned by a Wealth Replacement Trust.
* Take the money out during lifetime and buy an immediate annuity to provide a guaranteed annual income, to pay the income tax, and to pay for Insurance owned by a Wealth Replacement Trust.
* Take the money out during lifetime and pay the income tax, then gift the remaining cash through an Irrevocable Life Insurance Trust or other Irrevocable Trust.
* Name a Charitable Remainder Trust as beneficiary with a lifetime payout to a surviving spouse; the remaining assets passing to charity at the death of the spouse.
* Give up to $100,000 from IRAs directly to charity before December 31, 2007.

[Goodgrief]

Thanks for the input. That is pretty much what i have been discovering. Edward Jones had set it up properly(still in their name with me as bene) and elected ditributions based over my life expectancy. The only hope I have left is something about an "irrevocable discretionary trust". I still have much research to do yet. I knew it was too good to be true.

thanks again for the help

[tsharpe1992]

I am in California. I was about to file a Chapter 7 petition today but because I would lose too much due to how assets were calculated I did not file. My attorney stated that my Roth IRA of $9000 would be subtracted from my $25,000 wildcard exemption which would leave me with $16,000 remaining on the wildcard exemption.

Because of other assets totalling $20,000 + the 9,000 IRA, I have a total of $29,000 in assets. When you put the $25,000 wildcard into the equation, it looks like this $29,000 in assets - $25,000 wildcard exemption. The Trustee would be able to take $4000.

As I am asking around, I am finding out that my attorney could have incorrectly told me that the IRA would be counted against my wildcard but my financial advisor showed me a statement that according to the new bankruptcy law that IRAs are exempt.

Is there anyone who might be familiar with Chapter 7 bankruptcy in California and whether or not IRAs are exempt or not so that I can bring it to my attorney's attention.