Creditor Protection for Inherited IRAs

Financial Planning

In June 2013, North Carolina’s Governor signed Senate Bill 279 into law, which made changes to statutes related to estates, trusts, and guardianships. One change provides additional creditor protection on retirement accounts in North Carolina.

The updated law states:
Any money or other assets or any interest in any such plan remains exempt after an individual’s death if held by one or more subsequent beneficiaries by reason of a direct transfer or eligible rollover that is excluded from gross income under the Internal Revenue Code including, but not limited to, a direct transfer or eligible rollover to an inherited individual retirement account as defined in section 408(d)(3) of the Internal Revenue Code.
This means retirement accounts in North Carolina are free from the enforcement of creditor claims, both before and after the original account holder’s death. The updated creditor exemptions in the North Carolina statutes address:
  • Individual retirement accounts
  • Roth retirement accounts
  • Individual retirement annuities
  • Accounts established as part of a trust
Although retirement accounts (if eligible under the terms above) are exempt from being drawn to pay a decedent’s outstanding debts, executors must use other assets to pay down all debts prior to distributing estate assets. Property that is not exempt from creditor claims, such as bank accounts or certain real property, must be tapped to pay debts. Proper estate planning can help prevent assets from being depleted. Make time to create a comprehensive estate plan and update it regularly with a North Carolina estate planning lawyer.
Address: 1414 Raleigh Rd Ste 203, Chapel Hill NC 27517
Phone: 919.636.0950 | Toll Free: 800.201.0413 | Fax: 919.493.6355 |