Supreme Court: Inherited IRA’s Not Protected in Bankruptcy

In a unanimous decision, the Supreme Court in Clark, et ux v. Rameker, 573 U.S. __(June 12, 2014), resolved a split among federal appeals courts as to whether inherited IRA’s are shielded from creditors in bankruptcy.  Unlike traditional IRA’s, they are not.  The case dealt with a Wisconsin couple, Heidi Heffron-Clark and Brandon Clark. In 2001, Heffron-Clark inherited an IRA from her mother. When Heffron-Clark filed for bankruptcy relief in 2010, she argued that her inherited IRA was exempt from creditors and still technically a retirement account because that is the way it was set up. The Supreme Court disagreed.  In an opinion written by Sonia Sotomayor, the Court focused on the distinctions between traditional IRA’s and inherited IRA’s.  Unlike traditional IRA owners, inheritors cannot put additional money into the account and inheritors can withdraw money at any time without having to wait for retirement. The Court further noted that the possibility that some owners might use their inherited IRA funds for retirement purposes does not mean that inherited IRA’s bear the defining legal characteristics of retirement funds.


Jamie Harris is an associate attorney with DelCotto Law Group PLLC. Her practice of law focuses on helping business owners hurdle financial obstacles. Jamie is best known for her experience in filing Chapter 7, 11, 12, and 13 bankruptcies. In her Chapter 11 cases, Jamie has represented companies from many different industries including healthcare, nonprofit, trucking, construction, commercial real estate and telecommunications.


One Reply to “Supreme Court: Inherited IRA’s Not Protected in Bankruptcy”

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