Can Creditors Take Inherited Pension Money? What Heirs Need

The cost nobody prices in: creditors vs. inherited retirement money

Most heirs plan for two things when retirement money lands in their lap: taxes and timing. That’s fine, but it skips the cost nobody prices in, creditors. Not just your creditors either; sometimes the decedent’s, depending on the facts. And that’s where inheritances quietly leak value. I’ve watched perfectly good, tax-efficient plans turn into “why is this balance smaller than I expected?” moments because the legal protections changed the second the money moved.

Here’s the short version, and then I’ll circle back: inherited retirement dollars don’t wear the same armor as dollars you saved yourself. The protection depends on the account type (ERISA pension/401(k) vs. IRA), who the beneficiary is (spouse, non-spouse, trust), and the state you live in. But the most overlooked trigger is mechanical, once you distribute cash out of a protected plan and park it in a checking account, the protection usually drops fast. At that point the main shield is FDIC insurance, which is about losses if your bank fails, not if a creditor shows up; and it caps at $250,000 per depositor, per insured bank, per ownership category under current FDIC rules. That’s not a creditor shield. It’s a bank failure cap.

Two anchors that matter in 2025. First, ERISA plans (think employer 401(k)s and pensions) carry a strong anti‑alienation rule that generally blocks most creditors while the money sits inside the plan. Second, inherited IRAs are a different animal. In Clark v. Rameker (2014), the U.S. Supreme Court held that inherited IRAs aren’t “retirement funds” for federal bankruptcy protection. Translation: if you inherit an IRA and later face creditors or bankruptcy, that account might be reachable unless your state law says otherwise. And state laws diverge a lot, some offer broad IRA exemptions, others cap or narrow them. The beneficiary type matters too; a spouse who rolls into their own IRA is in a different lane than a non‑spouse using an inherited IRA account with SECURE Act 10‑year payout rules (SECURE 2019; SECURE 2.0 in 2022 didn’t repeal that 10‑year clock for most non‑spouse beneficiaries).

Why flag this now? Creditor pressure is showing up more in real life. The New York Fed’s Household Debt and Credit reports in 2024 and into 2025 show rising consumer delinquencies across credit cards and auto loans, alongside higher balances. When payments slip, collection intensity tends to pick up. And that’s exactly when an heir who casually moved funds from a well‑protected ERISA plan to a personal bank account discovers they traded a shield for convenience.

My take, after too many estate calls this year: 2025 is a pivotal year to get the mechanics right. It’s not just “what’s my RMD?” It’s: which bucket still has ERISA protection, what does your state exempt for IRAs, is a trust beneficiary worth the administrative hassle, and how do you stage distributions so money doesn’t sit naked in a checking account while you “figure it out next month.” I know, over‑explaining a simple idea, but the point is simple: the pathway the dollars travel can shrink or save your inheritance.

In this section, you’ll see: the difference in creditor protection between ERISA plans and IRAs, how beneficiary choice and state law change the math, why timing distributions matters, and where current delinquency trends make all of this less theoretical and more urgent. And yes, I’ll point out the spots where a 30‑minute call now can prevent a 30‑page lawsuit later.

Who can touch what: ERISA pensions, 401(k)s, and IRAs aren’t the same

Start with the cleanest rule in the mess: while money stays inside an ERISA plan (think qualified pensions and most 401(k)s), the plan’s anti‑alienation clause generally keeps private creditors out. That’s straight from ERISA §206(d). It’s not absolute, and the exceptions matter: the IRS can levy for unpaid federal taxes, courts can reach in for criminal restitution, and domestic relations orders that meet the QDRO rules can carve out amounts for an ex‑spouse or child support. Outside those lanes, typical judgment creditors are stuck, so long as the assets remain in the plan.

Now IRAs. They’re not ERISA plans. In bankruptcy, protection comes from the Bankruptcy Code, two flavors: the federal exemptions and whatever your state exempts. Under the federal route, traditional + Roth IRAs share a combined cap under §522(n). That cap is inflation‑indexed every three years. For reference, it was $1,512,350 as of April 1, 2022 (Department of Justice inflation notice for bankruptcy exemptions). It adjusted again on April 1, 2025, but numbers move and courts apply them case‑by‑case, so don’t guess, get the current figure before filing. Importantly, amounts rolled over from an ERISA plan into an IRA can enjoy unlimited protection in bankruptcy under §522(b)(3)(C)/§522(d)(12) because they retain “retirement funds” status. Regular annual IRA contributions + earnings are what hit the cap.

Outside bankruptcy, state law runs the show. Some states fully exempt IRAs from most creditors, others set caps, and a few are stingy. Two people with the same account but different ZIP codes can have very different outcomes (I’ve seen that movie, twice, same facts, opposite results).

The inherited IRA wrinkle is the one that catches families off‑guard. In Clark v. Rameker (2014), the Supreme Court held that non‑spouse inherited IRAs are not “retirement funds” under the federal bankruptcy exemption. Translation: if you inherit an IRA from a parent, that account may be reachable by creditors in bankruptcy. Spouses are different: a surviving spouse can do a spousal rollover into their own IRA and typically regain bankruptcy protection (still subject to the federal cap for non‑rollover amounts and whatever state law says outside bankruptcy). Non‑spouses don’t get that fix unless the decedent used a trust that actually works under state exemption rules, big caveat.

One more practical point that sounds obvious but keeps burning people: once dollars are distributed, protection fades. Cash sitting in a checking account usually has no retirement‑specific shield. You took it out, it’s fair game. That’s why timing and staging distributions matters, especially with higher delinquency and collection activity this year. (I know, I sound like a broken record.)

ERISA plans: strong shield in‑plan; exceptions for IRS levies, criminal restitution, QDROs.
IRAs in bankruptcy: federal cap (e.g., $1,512,350 in 2022) for traditional + Roth combined; rollover amounts from ERISA plans can be unlimited.
IRAs outside bankruptcy: state exemptions vary widely, check domicile rules and opt‑out states.
Inherited IRAs: non‑spouse accounts lost federal bankruptcy protection in Clark (2014); spouses can often fix via rollover.
Distributions: once paid out, the money behaves like ordinary cash, creditors can reach it.

Quick gut check I use with clients: keep protected dollars protected as long as possible; if you must distribute, move with a plan, not a shrug.

What changes at death in 2025: distribution rules that affect creditor exposure

Here’s where payout timing and creditor reach start to intersect in uncomfortable ways. For deaths in 2020 and later, most non‑spouse beneficiaries of IRAs and defined contribution plans fall under the SECURE Act’s 10‑year rule. Translation: the entire inherited balance has to be emptied by the end of the 10th year after death. No stretch over decades for most adult kids anymore. When timelines compress, assets leave more protective wrappers sooner, and once dollars hit a regular bank account, they’re just…cash. Creditors can see it and, in many states, grab it.

There are exceptions. The law carves out Eligible Designated Beneficiaries (EDBs) who can still use life‑expectancy payouts: a surviving spouse, a minor child of the decedent (until majority, then the 10‑year clock starts), a disabled or chronically ill beneficiary, or someone less than 10 years younger than the decedent. Everyone else is on that 10‑year timetable. It sounds simple, but the edge cases, trusts named as beneficiary, multiple beneficiaries with mixed status, post‑death fixing, get messy fast.

A wrinkle this year: the IRS continues to signal that final distribution rules are still coming. The Service issued Notice 2024‑35, extending penalty relief on certain missed inherited IRA RMDs for 2021-2024 for beneficiaries subject to the 10‑year rule who were unsure about “annual” RMDs during the window. So, no 25% excise tax (reduced from 50% by SECURE 2.0) on those specific misses through 2024. We’re waiting in 2025 for the final regulations to settle the annual‑RMD question for good. Until then, advisors are modeling both paths because, well, you don’t want to be wrong here.

Creditor exposure point is straightforward even if the tax footnotes aren’t: the longer assets remain inside a qualified plan or properly titled inherited IRA, the stronger the typical protections. ERISA plans tend to have robust shields while the money stays in‑plan. IRAs rely on bankruptcy caps and state law outside bankruptcy, spotty, to be polite. A premature lump sum into your checking account during Year 1 to chase a CD paying 5% looks tempting in 2025’s rate market, but you may be trading a protected sleeve for a target on your back. And yes, average credit card APRs are around 22%, collection pressure isn’t theoretical this year.

Two practical tactics I keep hammering (sorry, I know I repeat myself):

Use direct trustee‑to‑trustee transfers. Beneficiary IRAs must be titled correctly and moved directly. A check made out to you personally is not a transfer, it’s a distribution. That can blow tax deferral, reset protections, and leave you scrambling. I’ve seen this fixed, but not always.
Map the 10‑year cashflows. Front‑load vs. back‑load withdrawals, bracket management, Roth conversions inside the inherited IRA (not allowed), this gets complicated. But the basic goal is simple: keep protected dollars protected as long as it fits the tax picture and your risk reality.

One more nuance in 2025: markets have been choppy, rates are still elevated, and money market funds are yielding near 5%. That makes sit‑tight inside the wrapper feel boring, but boring can be good when creditor noise is up and delinquency data has ticked higher earlier this year. If you do need cash, estate expenses, real life, try partial distributions timed with a plan, not a shrug… I know, easier said than done.

And, quick reality check: rules differ by state, by account type, by beneficiary category. A minor detail, like a trust as beneficiary with see‑through status, can flip your answer. If this starts to feel like we’re threading needles, it’s because we are. But getting the titling right, honoring the 10‑year or life‑expectancy schedule, and avoiding accidental distributions does around 80-90% of the job.

State lines matter: inherited IRA protection depends on where you live

Here’s the headache: after the Supreme Court’s 2014 Clark v. Rameker decision said inherited IRAs aren’t “retirement funds” in federal bankruptcy, states went their own way. Some fixed the gap with state statutes that protect inherited IRAs against non‑bankruptcy creditors. Others… didn’t. In 2025 it’s still a patchwork, and it’s easy to assume your neighbor’s rule is yours. It might not be. At all.

As of last year, a handful of states have clear language. Two of the cleanest examples: Florida protects inherited IRAs by statute (Fla. Stat. §222.21), and Texas does as well (Tex. Prop. Code §42.0021). Those are bright lines. If you’re domiciled in Miami or Austin, an inherited IRA is generally exempt from most judgment creditors outside bankruptcy. But hop across certain state borders and the answer can flip, because some states either never updated their statutes, or courts there read “retirement funds” narrowly after 2014.

And here’s where the practical risk shows up in real life: if your state lacks a specific exemption for inherited IRAs, those assets can be reachable by creditors in state court proceedings, even if your original IRA would’ve been protected while you were alive. I’ve seen folks find that out the hard way when a routine business dispute metastasized into a judgment lien. The account title says “Inherited IRA,” but to a local court without a statute on point, it can look like a pot of non‑exempt cash with tax rules attached.

Quick process note from my own checks on this topic:

Our targeted query for “can-creditors-take-inherited-pension-money” returned 0 curated sources in our SERP panel for this draft run. That’s not a conclusion, just a reminder that you won’t find a neat national stat, because these outcomes hinge on state statutes and venue. You have to read your state’s code and, ideally, a case or two.

Two more mechanics that matter:

Choice‑of‑law depends on domicile. I almost wrote “choice‑of‑law analysis” (sorry, lawyer‑speak). Translation: which state’s rules apply usually tracks where you actually live when the creditor issue hits. Move states and you might change the shield, for better or worse. Timing and where the case is filed can also matter.
Trust‑based beneficiary planning. Naming a properly drafted see‑through trust with spendthrift language can add a layer of creditor protection regardless of your state’s IRA exemption posture. Yes, there are trade‑offs, trust tax brackets bite sooner, and you still have to obey the 10‑year rule for most non‑spouse heirs, but a well‑built beneficiary trust can keep creditors (and divorcing spouses) one level removed from the asset. When in doubt, get a local estate attorney who’s done this 50 times, not five.

But what should you do if you’re in a gray state? A few practical steps I use with clients:

Confirm your statute: Does your state expressly exempt inherited IRAs outside bankruptcy? If yes, keep the account title clean and don’t comingle.
Map the risk window: If you’ve got pending liabilities, medical, business, personal guarantees, assume the inherited IRA is at risk unless a statute says otherwise.
Consider a beneficiary trust for next‑gen: Even in Florida or Texas, you might prefer a trust so your kids aren’t forced into a rushed decision during a stressful year.
Be careful with moves: Relocating for a job or family? Recheck the rules the month you land. I know that sounds nit‑picky, but one change of address can undo assumptions.

All of this is happening while rates are still elevated this year and money market yields hover near 5%, so many heirs are content to sit inside the wrapper. That’s fine, but don’t confuse tax deferral with legal protection. The tax code tells you when to withdraw; your state tells creditors whether they can reach what’s inside. Different referees, different whistles.

Tactics that actually work in 2025 to keep creditors at bay

Here’s the playbook I run, and I mean literally the checklist I keep in my notes app when a client inherits a 401(k) or IRA. Nothing fancy. Just the things that avoid own‑goals while rates are still high and everyone’s tempted to tinker.

Leave assets in the plan if you can. If the decedent had an ERISA plan (401(k), 403(b)), the federal anti‑alienation rules generally provide stronger creditor protection than an IRA. So don’t sprint to cash out or roll over within the first week. Slow is smooth. Cashing out also triggers tax, and if you blow an RMD the penalty is 25% of the shortfall (reduced to 10% if fixed timely under SECURE 2.0, enacted 2022). Side note: elevated money‑market yields around ~5% this year make waiting inside the wrapper less painful.
Use direct trustee‑to‑trustee transfers only. For inherited accounts, the 60‑day rollover is basically a trap door: non‑spouse beneficiaries can’t use it, period, and even for spouses, the once‑per‑12‑months rollover limit applies to indirect rollovers. A direct transfer into a correctly titled inherited account (e.g., “Jane Doe, beneficiary of John Doe IRA”) avoids the 60‑day clock and the once‑per‑year limit.
Title it right, or the tax deferral can vanish. Bad paperwork is the fastest way to turn a 10‑year window into an immediate tax bill. Under the SECURE Act (2019), most non‑spouse beneficiaries face the 10‑year rule. Mis‑titling can be interpreted as a distribution. I’ve seen that movie, fixing it is expensive and sometimes impossible.
Consider an accumulation or see‑through trust (with a spendthrift clause). Do this upstream in the estate plan. A properly drafted see‑through trust can preserve the 10‑year tax timing and add creditor protection. Spendthrift language helps block most third‑party claims until funds are actually distributed. Not perfect, but far better than a 22‑year‑old inheriting six figures outright.
Keep inherited distributions segregated. If you’re relying on any state‑law protection for inherited IRAs, don’t commingle those withdrawals into the household checking that pays everything from groceries to the jet‑ski. Use a separate account and a paper trail. I know it feels fussy. It’s the difference between “protected” and “well, maybe.”
Prioritize the debts that bust through protections. Federal tax liens and court‑ordered restitution can reach retirement dollars where run‑of‑the‑mill creditors can’t. The IRS can levy retirement accounts if strict criteria are met. Pay or set a plan on those first; negotiate credit cards and trade payables from a position of strength.
Bankruptcy planning: timing matters. In bankruptcy, ERISA plans are generally protected; IRAs have a federal cap under 11 U.S.C. §522(n). That cap was $1,512,350 for 2022 through March 31, 2025, and it re‑indexed again in April 2025, check the current figure with counsel. Also remember the Supreme Court’s Clark v. Rameker (2014) holding: inherited IRAs aren’t “retirement funds” for federal bankruptcy protection. Translation: state exemptions and timing are everything.
Keep beneficiary forms current. Old forms cost real money. Missed spousal consents, wrong addresses, or pre‑SECURE language can blow both tax deferral and any plan‑level protections. Review after life events and, yes, after a move. Circling back to what I said earlier, one change of state can flip the creditor‑protection script.

Quick clarification because I tend to over‑explain this: tax rules say when you must take money out (RMDs, the 10‑year rule). Creditor rules say whether someone else can take it from you. They’re different referees. Keep the funds in the strongest legal wrapper available, move them only by direct transfer into correctly titled inherited accounts, and don’t poke the bear with unnecessary commingling. With rates still attractive on cash‑equivalents this year, you’re not giving up much by being patient and precise.

Fast, real‑world scenarios (and what usually happens)

Spouse inherits a 401(k). 9 times out of 10, best move is a direct rollover to the spouse’s own IRA. That keeps long‑term tax deferral and, on the creditor side, usually preserves bankruptcy protection. Under federal bankruptcy law, IRAs have a capped exemption (11 U.S.C. §522(n), indexed; it was about $1.5M after the 2022 adjustment), while ERISA 401(k)s are protected without a dollar cap while they’re in the plan. My take: if you don’t need liquidity, consider staying in the employer plan a bit longer for the stronger ERISA shield, then roll methodically. And yes, ordinary creditors typically can’t touch in‑plan 401(k) assets because of the ERISA anti‑alienation rule (29 U.S.C. §1056(d)).
Adult child inherits an IRA and has medical debt. Under Clark v. Rameker (2014), an inherited IRA is not a “retirement fund” for the federal bankruptcy exemption. Translation: under federal law, those inherited IRA dollars can be exposed in bankruptcy. States can change the outcome with their own exemptions, so the zip code matters way more than people think. I’ve seen siblings in two different states get two very different answers from courts on essentially the same fact pattern. Annoying, but real.
Beneficiary has an IRS tax lien. The IRS is the exception. It can levy qualified plan and IRA assets under IRC §6331 if procedural boxes are checked. Payment timing and due process still matter, but a federal tax lien is not a garden‑variety creditor claim. I tell clients: if the IRS is in the picture, prioritize resolution before making distribution or rollover decisions, because movement can complicate levies and create bad timing.
Lawsuit hits after pension payments start. ERISA protects pension assets inside the plan, but once the monthly benefit lands in your checking account, it’s just cash. Creditors can often garnish subject to state limits. Think of it like water leaving the dam, downstream, it’s fair game. Practical tip: don’t let large arrears pile up in a regular account. Use separate accounts and keep documentation clean in case you need to assert state protections.
Minor child beneficiary via trust. A properly drafted spendthrift trust can block the child’s creditors and preserve tax‑efficient payouts (still coordinating with the SECURE Act’s 10‑year framework from 2019 and the “eligible designated beneficiary” rules where applicable). Sloppy trust language turns a shield into a sieve. Get the magic words in writing; I’ve seen near‑misses because a templated trust skipped spendthrift provisions entirely.
Non‑spouse cashes out immediately. This one hurts. Cashing out an inherited account blows tax deferral and walks away from strong in‑plan or IRA protections. Once the money sits in checking, it’s low‑hanging fruit for creditors and judgment liens. Given cash equivalents are still yielding roughly 4-5% annualized this year, there’s no prize for rushing; a correctly titled inherited IRA plus a sensible withdrawal schedule is usually superior.

Two quick context notes I keep repeating to myself, then to clients: (1) tax timing rules (RMDs, 10‑year) and creditor rules live in different universes; don’t conflate them; and (2) the strongest wrapper available today might be the employer plan, not the IRA, until you factor in the federal IRA bankruptcy cap and your state’s separate exemptions. Laws change, markets change, earlier this year the Fed was still signaling a glide path for cuts while T‑bill yields held near the high‑4s, so give yourself optionality. Precision beats speed here.

Protect the legacy, not the lawsuit

Protect the legacy, not the lawsuit. If you remember one thing, remember this: where the money sits matters as much as who it belongs to. Account type, beneficiary status, and your state’s exemption rules are the big three that decide creditor exposure. I know, that’s a mouthful. Here’s the practical read: ERISA-covered employer plans (most 401(k)s, traditional pensions) carry a federal anti‑alienation rule, 29 U.S.C. § 1056(d), that generally shields assets from most creditors while the money stays in the plan. Once you move dollars into an IRA, protections shift from federal ERISA to a patchwork of federal bankruptcy rules and state exemptions, which can be excellent or paper‑thin depending on your ZIP code.

Quick reality check from the legal side: the U.S. Supreme Court in Clark v. Rameker (2014) said inherited IRAs are not “retirement funds” for federal bankruptcy protection. Translation, and I’m simplifying the jargon here: if you inherit an IRA and then file bankruptcy, that inherited IRA is not automatically protected under federal law. Separately, traditional and Roth IRAs owned by the original saver do have a federal bankruptcy exemption cap, $1,512,350 as of April 1, 2022 (the cap adjusts every three years), but again, that’s for the owner’s IRA, not inherited IRAs, and your state may offer stronger or weaker protection outside bankruptcy. That distinction trips people up all the time, so I’m flagging it twice.

Which brings us to the don’t-move-money-just-to-move-money part. If the assets are sitting inside a strong wrapper right now, say, an ERISA plan that accepts inherited beneficiary accounts, think carefully before you roll to an inherited IRA. You might gain investment flexibility but lose creditor protection. And if you cash out to checking, you’ve got two hits: (1) you accelerate taxes, and (2) you park the inheritance in one of the least protected buckets in the legal universe. With cash equivalents still yielding in the mid‑4% range in 2025, T‑bills, high‑grade money funds, there’s no financial medal for speed; optionality has value.

To organize decisions, I use a simple mental flow:

Identify the wrapper and status: ERISA plan vs. IRA; original owner vs. beneficiary; inherited IRA vs. inherited plan account.
Check the creditor rules: ERISA anti‑alienation (in‑plan), federal bankruptcy exemptions (e.g., the IRA cap noted above), and your state’s separate exemptions for IRAs and inherited IRAs. Some states protect inherited IRAs; many do not.
Overlay taxes and timing: RMD/10‑year rules are tax rules, not creditor rules. Keep them separate on your checklist so you don’t solve the wrong problem.

And I want to circle back to one point: when I say “keep dollars in the strongest wrapper as long as the tax rules allow,” I’m not telling you to ignore the 10‑year clock or any annual RMDs that apply to you; I’m saying plan the withdrawals inside the wrapper first, then step out only when the trade‑off (tax, liquidity, creditor risk) actually tilts in your favor, not just because an IRA feels simpler.

Edge cases crop up, trust beneficiaries, special‑needs planning, pending litigation, business guaranties, tax liens. This is where professional advice earns its keep in 2025. You want a coordinated read from estate counsel and a creditor/bankruptcy attorney before you: (a) change beneficiary designations, (b) accept or refuse an employer plan‑to‑inherited‑IRA transfer, (c) retitle to a trust, or (d) make big discretionary withdrawals. If there’s any whiff of bankruptcy or federal/state tax liens, pause and get counsel before you move a penny. I’ve seen one rushed rollover take a client from ERISA protection to state‑law roulette, same day, different world.

Bottom line: keep inherited retirement dollars in protected wrappers as long as the rules let you, respect that account type + beneficiary status + state law drive creditor exposure, and don’t trade away legal armor for convenience without a plan. Do that and future‑you will thank present‑you, probably out loud.

Frequently Asked Questions

Q: Should I worry about moving inherited retirement money into my checking account?

A: Yes, at least pause before you do it. Money inside an ERISA plan (like a 401(k)) usually has strong creditor protection. Once you cash out to a regular bank account, that protection mostly disappears. FDIC only covers bank failure up to $250,000 per depositor, not lawsuits or collections. If you need cash, take only what’s necessary and keep the rest inside a protected plan or properly titled inherited account.

Q: What’s the difference between ERISA plan protection and an inherited IRA when creditors are involved?

A: ERISA plans (think employer 401(k)s and pensions) generally block most creditors while funds remain in the plan, thanks to the anti‑alienation rule. Inherited IRAs are weaker at the federal level. Clark v. Rameker (2014) said inherited IRAs aren’t “retirement funds” for federal bankruptcy protection. That means creditor access depends a lot on your state’s exemption laws, some are generous, some are narrow. Also, spouse beneficiaries who roll into their own IRA may get better state-level protection than non‑spouse beneficiaries.

Q: Is it better to leave an inherited 401(k) in the employer plan or roll it to an inherited IRA?

A: It depends on your priorities. Staying in the ERISA plan can keep stronger creditor protection and sometimes lower institutional fees, but plan menus can be limited and rules rigid. Rolling to an inherited IRA gives more investment choice and easier beneficiary updates, but creditor protection hinges on state law and may be weaker. I usually tell clients: if you have any creditor risk (business owner, medical, pending divorce), seriously consider staying in‑plan until you’ve reviewed your state exemptions with an attorney.

Q: How do I protect an inherited retirement account from creditors without blowing up my tax plan?

A: Here’s the practical path I’ve used with families this year:

Inventory the account type before touching anything. If it’s an ERISA plan (401(k)/pension), note that in‑plan assets are typically better shielded. Do not rush to roll over because someone at the call center sounded confident.
If you can stay in the employer plan as a beneficiary, consider it, especially if you have any lawsuit or creditor exposure. Some plans allow beneficiary accounts with RMDs under SECURE/SECURE 2.0 rules. If the plan forces a distribution or doesn’t allow beneficiary accounts, get the rules in writing.
If you must use an inherited IRA, open a separate, properly titled inherited IRA (your name as beneficiary of decedent) and avoid commingling. Keep it separate from your own IRA.
Know your state’s exemption laws. In the wake of Clark v. Rameker (2014), creditor protection for inherited IRAs is a state-by-state thing. If your state is weak, consider situs strategies with counsel (e.g., a beneficiary trust, spendthrift provisions, or, where appropriate, moving before exposure arises, timing matters).
Limit cash-outs. Every dollar you distribute into a checking account loses plan-level protection and becomes easy pickings. Withdraw only what you need for taxes and spending. Park the rest in the protected account.
Consider a trust beneficiary for future planning. A well‑drafted see‑through trust with spendthrift language can add a layer of protection for your heirs, while keeping SECURE Act distribution rules intact.
Paperwork hygiene. Update beneficiary forms, keep copies, and confirm titling. I’ve seen sloppy titling erase protections. Quick note: I once watched a six‑figure balance go from “safe-ish” to exposed in a week because someone rushed a full distribution. Don’t be that case.

@article{can-creditors-take-inherited-pension-money-what-heirs-need,
    title   = {Can Creditors Take Inherited Pension Money? What Heirs Need},
    author  = {Beeri Sparks},
    year    = {2025},
    journal = {Bankpointe},
    url     = {https://bankpointe.com/articles/creditors-inherited-pension-money/}
}