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Inherited IRA funds not considered ‘retirement funds’

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The Supreme Court of the United States unanimously held Thursday that funds contained in an inherited individual retirement account do not qualify as “retirement funds” within the meaning of a bankruptcy exemption.

Justice Sonia Sotomayor delivered the opinion for the court, which affirmed the 7th Circuit Court of Appeals. She noted three legal characteristics of inherited IRAs led the court to conclude the funds held in such accounts are not objectively set aside for purposes of retirement.

“First, the holder of an inherited IRA may never invest additional money in the account. Inherited IRAs are thus unlike traditional and Roth IRAs, both of which are quintessential ‘retirement funds.” She wrote. “Second, holders of inherited IRAs are required to withdraw money from such accounts, no matter how many years they may be from retirement. … Finally, the holder of an inherited IRA may withdraw the entire balance of the account at any time – and for any purpose – without penalty.”

The decision comes in Clark v. Rameker, 13-299, in which an IRA was inherited by a daughter who later filed for bankruptcy. Heidi Heffron-Clark argued the inherited IRA was still a retirement fund, and therefore, was exempt from creditors under Section 522 of the U.S. Bankruptcy Code. The 7th Circuit held that when an IRA was inherited by someone other than the owner’s spouse, it was no longer exempt from creditor’s claims.

Sotomayor also noted that the possibility that some investors may use their inherited IRAs for retirement purposes does not mean that the inherited IRAs bear the defining legal characteristics of retirement funds.

“Were it any other way, money in an ordinary checking account (or, for that matter, an envelope of $20 bills) would also amount to ‘retirement funds’ because it is possible for an owner to use those funds for retirement,” she wrote.

 

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  1. From his recent appearance on WRTV to this story here, Frank is everywhere. Couldn't happen to a nicer guy, although he should stop using Eric Schnauffer for his 7th Circuit briefs. They're not THAT hard.

  2. They learn our language prior to coming here. My grandparents who came over on the boat, had to learn English and become familiarize with Americas customs and culture. They are in our land now, speak ENGLISH!!

  3. @ Rebecca D Fell, I am very sorry for your loss. I think it gives the family solace and a bit of closure to go to a road side memorial. Those that oppose them probably did not experience the loss of a child or a loved one.

  4. If it were your child that died maybe you'd be more understanding. Most of us don't have graves to visit. My son was killed on a state road and I will be putting up a memorial where he died. It gives us a sense of peace to be at the location he took his last breath. Some people should be more understanding of that.

  5. Can we please take notice of the connection between the declining state of families across the United States and the RISE OF CPS INVOLVEMENT??? They call themselves "advocates" for "children's rights", however, statistics show those children whom are taken from, even NEGLIGENT homes are LESS likely to become successful, independent adults!!! Not to mention the undeniable lack of respect and lack of responsibility of the children being raised today vs the way we were raised 20 years ago, when families still existed. I was born in 1981 and I didn't even ever hear the term "CPS", in fact, I didn't even know they existed until about ten years ago... Now our children have disagreements between friends and they actually THREATEN EACH OTHER WITH, "I'll call CPS" or "I'll have [my parent] (usually singular) call CPS"!!!! And the truth is, no parent is perfect and we all have flaws and make mistakes, but it is RIGHTFULLY OURS - BY THE CONSTITUTION OF THIS GREAT NATION - to be imperfect. Let's take a good look at what kind of parenting those that are stealing our children are doing, what kind of adults are they producing? WHAT ACTUALLY HAPPENS TO THE CHILDREN THAT HAVE BEEN RIPPED FROM THEIR FAMILY AND THAT CHILD'S SUCCESS - or otherwise - AS AN ADULT.....

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