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I inherited my father's IRAs. I have accounts with Fidelity…

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I inherited my father's...

I inherited my father's IRAs. I have accounts with Fidelity and Schwab. One of my Schwab accounts is titled Inherited; the other is listed as a Roth. The Fidelity account is listed as an IRA. My question: I have a legal issue looming and it is entirely possible a creditor may come after my assets. I spoke to two bankruptcy attorneys and they confirmed that inherited IRAs are not protected by chapter 7 bankruptcy. If I cash out the inherited IRA (with the proper tax withholding) and then open an IRA in my name (which, apparently, is protected by bankruptcy), would the money after taxes be construed as taxable income? Or would the fact I used it to open another IRA make it exempt from taxes?In short, I need to protect my assets in case I need to file bankruptcy. I inherited all my assets from my father when he died in 2009. Not sure why only one account is listed as an Inherited IRA.Do you have any advice?

Accountant's Assistant: The Accountant will know how to help. Is there anything else important you think the Accountant should know?

No. That about covers it.

Submitted: 8 months ago.Category: Finance
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Answered in 7 minutes by:
11/14/2017
Financial Professional: Lev, Tax Preparer replied 8 months ago
Lev
Lev, Tax Preparer
Category: Finance
Satisfied Customers: 33,141
Experience: Personal Investment, Tax Preparation
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I spoke to two bankruptcy attorneys and they confirmed that inherited IRAs are not protected by chapter 7 bankruptcy.

That is correct.

Only a spouse may treat inherited IRAs as his/her own.

All other beneficiaries may not treat inherited IRAs as their own - and they are not protected in bankruptcy cases as your own IRAs.

If I cash out the inherited IRA (with the proper tax withholding) and then open an IRA in my name (which, apparently, is protected by bankruptcy), would the money after taxes be construed as taxable income?

Correspondingly - you may not rollover funds from inherited IRSa to your own.

You might be eligible to open your own IRA or Roth IRA accounts and make contributions based on your earned income.

But that will not be connected to these inherited IRA accounts.

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Financial Professional: Lev, Tax Preparer replied 8 months ago

.

Please be aware that inherited IRAs are generally distributed within five years unless you elected to take distributions over the lifetime.

Let me know if you need to elaborate.

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