Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Monday, February 24, 2014

Amicus Brief Argues That Inherited Retirement Accounts Should Not be Exempt From Bankruptcy Creditor Claims

IRAAs I have previously discussed, the Seventh Circuit Court of Appeals has held that inherited IRS’s are not creditor exempt in bankruptcy. The case is now before the U.S. Supreme Court, and Jenner & Block, a national law firm headquartered in Chicago, has filed an amicus brief. The brief addresses the issue of whether inherited retirement funds should also be exempt from creditor claims, as are retirement funds held by the original owner. The brief addresses the differences between inherited and originally owned retirement accounts in the ways they are treated under tax law.

IRA owners make pre-tax contributions to their IRAs, and are prohibited or penalized for withdrawing funds prior to reaching retirement age. However, additional contributions are not allowed with inherited IRA’s, and withdraws from the account are often immediate and prior to the beneficiaries reaching retirement age. The brief argues that since the two accounts are treated differently for tax purposes, they should also be treated differently under the Bankruptcy Code. The brief concludes that inherited retirement accounts should not be treated as bankruptcy exempt accounts.

See, Firm Files Amicus Brief in Bankruptcy Matter Pertaining to Inherited Retirement Accounts, Jenner & Block, Feb. 21, 2014.


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