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It depends on where you live, or more precisely where your beneficiaries live.  In the Fifth Circuit and Eighth Circuit your inherited IRA is protected, but in April this year the Seventh Circuit held that Wisconsin resident Heidi Heffron-Clark’s inherited IRA worth $300,000 was available to her creditors.  This was a devastating result for her, and definitely not what her mother envisioned when leaving her lifetime savings to her daughter.  What about here in California?  The Ninth Circuit has yet to take up the question, and it is anyone’s guess what they will hold should the question come up.

The good news is this: if you are planning on leaving your IRA to your children, or other beneficiaries, there are ways of providing creditor protection with some advanced estate planning.