A couple years ago I posted an article in my bankruptcy law blog regarding inherited IRAs. My post discussed a Florida state court decision which held that the statutory IRA exemption from creditors does not apply to IRAs which the debtor inherited. Subsequently, a Florida bankruptcy case held that inherited IRAs are not exempt in Chapter 7 bankruptcy cases. The bankruptcy court cited as authority a Texas bankruptcy court decision In re Chilton, 426 B.R. 612. In March of this year a federal district court in Texas reversed the Chilton decision. The Texas court said that inherited IRAs are tax exempt “retirement funds” which will support debtors during their retirement and should be protected under the bankruptcy code’s exemption of retirement proceeds.
The Texas federal court decision does not directly overturn the Florida cases denying the exemption to inherited IRAs, but it may give other Florida judges precedent and rationale to extend the exemption to the inherited IRA in future cases. Chilton v. Moser, 2011 WL 938310