Landmark Supreme Court Decision Exposes Inherited IRAs To Creditors In Bankruptcy

The U.S. Supreme Court held in Clark v. Rameker that inherited IRAs are not “retirement funds” within the meaning of 11 U.S.C. §522(b)(3)(c), a federal bankruptcy law. This means inherited IRAs are available to satisfy creditors’ claims. How the SCOTUS Reached Its Decision The Court relied upon three factors to differentiate an inherited IRA from a participant-owned IRA. The three factors include: (1) the beneficiary of an inherited IRA cannot make additional contributions to the account, while an IRA owner can, (2) the beneficiary of an inherited IRA must take required minimum distributions from the account regardless of how...