When filing for bankruptcy, the specific amount you could exempt from your inheritance would depend on the particular type of inheritance you’re bound to receive. Some states don’t have explicit exemptions regarding inheritance, but provide exemptions for real property, personal property, private retirement property, and business property.
Inheritance and Bankruptcy Exemptions
If you stand to inherit personal and real property, you might be able to use personal and real property exemptions according to your state bankruptcy laws. Do note that some states permit debtors to decide between federal and state bankruptcy exemptions, while other states like Utah don’t.
Bankruptcy lawyers in Salt Lake City also explain that if you filed for bankruptcy in a state where you’re allowed to choose between federal and state bankruptcy exemptions, you won’t be able to mix and match items from both exemption sets.
If you’re allowed to exempt your inheritance:
For Real Property
You have to modify Official Form 6A, also known as B6A or Schedule A. Real property is any property that you have future, equitable, or legal interest, such as community property, a property you co-own, or a property that you have a life estate.
You have to modify Official Form 6B, also known as B6B or Schedule B. In general, personal property includes cash, savings accounts, checking accounts, jewelry, stocks, insurance policies, digital devices (laptops, smartphones, etc.), antiques, books, clothes, sporting equipment, firearms, art pieces, musical instruments, and sporting equipment.
As of June 2014, the United Supreme Court mandated that inherited individual retirement accounts (IRAs) are not considered retirement funds, which means that they can’t be exempt from creditors.
While the law doesn’t require debtors to get legal help when filing for bankruptcy, it would still be wise to do so to determine if bankruptcy is the best recourse and that you’re taking the proper steps. More importantly, if you’re having issues with an upcoming inheritance, your lawyer could help you figure out the exemptions applicable to your case and how you could use them to safeguard as much of your inheritance and other property as possible.