Jump To Navigation

Supreme Court to decide inherited IRA fate in bankruptcy

Bankruptcy attorneys in Washington know that certain assets are exempt from creditors' claims. One particular type of asset is being considered by the nation's highest court, however, as creditors attempt to gain access to certain types of retirement accounts during individual bankruptcy. The decision in the case could have wide-reaching effects for people who inherit retirement accounts from other family members.

News reports show that the court is working to determine whether an inherited individual retirement account may be exempted from creditors' claims when filing for bankruptcy. Federal courts appear to be divided on the issue; a judicial body in Chicago determined that the IRAs are considered fair game during bankruptcy, while a court in New Orleans came to the opposite conclusion. The Supreme Court justices say that the issue is difficult to define because common sense does not necessarily apply to this aspect of the law.

At issue is the fact that retirement accounts that are in a tax-exempt fund are considered as bankruptcy exemptions. However, in most cases those funds belong directly to the person who is filing for bankruptcy. The IRAs in this case belonged to another person who then bequeathed it to the plaintiff. This specific case involved a woman who received access to a $300,000 IRA after her mother passed. Creditors ostensibly attempted to seek compensation through that inheritance, though the issue has now made it to the nation's highest court for consideration.

Filing for bankruptcy is not always simple, with state exemptions and certain provisions for retirement savings accounts. That is why a Washington bankruptcy attorney may be able to provide advice and guidance for those who are considering filing for bankruptcy. A professional bankruptcy attorney may serve as a valuable ally and advocate, protecting filers from unfair creditor claims.

Source: Worchester Telegram and Gazette, "Supreme Court hears case on bankruptcy-exempt inherited IRAs" Bill Rochelle, Bloomberg News, Mar. 25, 2014

No Comments

Leave a comment
Comment Information

Contact Form

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Privacy Policy

Contact Information

Law Office of Ruth Nelson
7742 14th Avenue NW
Seattle, WA 98117
Phone: 206-633-2517
Map and Directions

Privacy Policy | Business Development Solutions by FindLaw, a Thomson Reuters business.