by John Darer CLU ChFC CSSC RSP CLTC
The United States Supreme Court (SCOTUS) ruled that inherited Individual Retirement Accounts (Inherited IRAs) ARE NOT shielded from creditors in bankruptcy proceedings, a decision that clears up confusion about the status of IRAs that parents leave to their children.
While bankruptcy law typically protects retirement assets from the reach of creditors, unlike a typical IRA, money in an inherited IRA can be withdrawn without waiting for the new owner to retire. The Supreme Court reasoned that this change in the status of the account is readily available to payoff creditors.
In the underlying case, a Wisconsin couple, Heidi Heffron-Clark and her husband, declared bankruptcy and were seeking to protect an IRA that she inherited from her mother.
Cite: SCOTUS Clark v. Rameker, 13-299.