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Inherited IRA

Inherited IRA

July 11th, 2014 by lawfirm

In the recently decided Clark v. Rameker case, the United States Supreme Court ruled that an inherited IRA does not fall within the scope of a Bankruptcy Code statute providing for exemption of “retirement funds.” The Court construed the statutory language and concluded that the assets in an inherited IRA were not “retirement funds” within the meaning of the statute in question. The result – the debtor could not exempt the inherited IRA. This ruling was a win for trustees. Does this ruling necessarily mean that an inherited IRA could be reached by trustee in a bankruptcy case in Georgia? Look back to a case from 1997 for possible guidance. In the case of In re Meehan, the Court of Appeals for the Eleventh Circuit ruled that a debtor’s IRA was excluded from property of the bankruptcy estate because Georgia law imposes restrictions on transfer by garnishment of assets in an IRA. The Court concluded that the restrictions on transfer were sufficient to exclude the IRA from the bankruptcy estate. The debtor could keep his IRA. The Clark case involved exemptions rights. The Meehan case turned on whether the IRA was property of the estate. The ruling in Clark does not resolve the question of whether an inherited IRA can be excluded from the bankruptcy estate. Under a Meehan type analysis, would a court conclude that an inherited IRA was excluded from the bankruptcy estate?

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