Inherited Individual Retirement Accounts in Bankruptcy
If you are considering filing for bankruptcy, you may wonder if you can keep your property after the bankruptcy is filed. There are many factors to consider in answering this question.
One area where the law has recently been clarified concerns individual retirement accounts, or IRA’s. Generally, an IRA that you establish for your own retirement is exempt in the bankruptcy and you are permitted to keep it (although there are some limited exceptions to this general rule). Furthermore, if your spouse passes away and you inherit the IRA that your spouse established, this too is generally exempt in bankruptcy and you are permitted to keep it (although again there are some limited exceptions to this general rule).
But what about an IRA that you inherit from someone else? In the recent United States Supreme Court case of Clark v. Rameker, the Court found that an IRA inherited from someone other than your spouse is not exempt under federal law because, among other reasons, unlike an IRA you establish for yourself, you are not permitted to make contributions to the inherited IRA; you must make specified withdrawals from the inherited IRA; and there is no penalty for withdrawals made from the inherited before the age of 59 1/2. Thus, under federal law, an IRA inherited from someone other than your spouse is not exempt and you could lose it in your bankruptcy.
However, if you live in Ohio, and you are entitled to claim Ohio exemptions, you may be able to protect the inherited IRA in your bankruptcy. Unlike the federal law, a recently passed Ohio law protects inherited IRA’s from your creditors.
Call our office today to schedule a consultation to discuss your situation, including any issues regarding an IRA, with Attorney Mina Nami Khorrami.
The within statements are general in nature and this information is not intended as a substitute for legal advice regarding your specific case, nor is an attorney-client relationship established between Mina Nami Khorrami, LLC and any person reading this information. Mina Nami Khorrami is an experienced bankruptcy and debt attorney based in Columbus, Ohio.