Trust Updates Archive
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(June 13, 2014 --Chicago, IL) -- Funds in an inherited IRA are not considered "retirement funds" for purposes of bankruptcy exemption, the U.S. Supreme Court unanimously ruled yesterday. The ruling settles a split among federal appeals courts and allows the growing number of aging baby-boomers to better plan how they will pass on unspent IRA funds. "Although petitioners’ counterarguments are not without force, they do not overcome the [federal bankruptcy] statutes’ text and purpose , " wrote Justice Sonia Sotomayer for the court. During oral arguments, earlier this year, several justices were concerned that granting inherited IRAs the same creditor protection that IRAs have, when in the hands of the original owner, would be creating a "special class" of retirement account. Prior to the high court’s ruling yesterday, only the Seventh Circuit Court of Appeals came to a similar conclusion. Possibly compounding yesterday’s ruling are laws in seven state that specifically protect inherited IRA accounts from creditors. Overview Petitioners, a husband and wife, filed for Chapter 7 bankruptcy, and identified as exempt from their bankruptcy estate an inherited individual retirement account (IRA) of roughly $300,000, under the "retirement funds" exemption. This exemption permits a debtor to exempt retirement funds when those funds are in an account that is exempt from taxation under the Internal Revenue Code. The bankruptcy court denied the exemption, concluding that an inherited IRA is not the same as a traditional IRA. A federal district court reversed, reasoning that the bankruptcy exemption includes any account in which funds were gathered for retirement purposes. The Seventh Circuit reversed the District Court. For more on this topic, see Trust Regulatory News. For a copy of the U.S. Supreme Court ruling Click Here. ******************** Trust Performance Report is the trust industry’s most comprehensive annual and quarterly report of industry best practices and benchmarks. In addition to bank trust divisions, the report contains information on state-chartered trust companies. The 182-page report is published during the first week of May and reports on 1,500 institutions. Quarterly updates report on the top 350 institutions. To view sample pages of Trust Performance Report, go to http://www.trustupdates.com/TPR2014.SamplePages.pdf or contact Scott Miller, circulation manager, at circulation@trustupdates.com or by calling 800-404-2116. ******************** No statement in this issue is offered as or should be construed as legal opinion or advice or as an indicator of future performance. To subscribe to Trust Updates or for a trial subscription go to http://www.trustupdates.com/Subscribe/Free_and_Trial/ To unsubscribe to Trust Updates go to To subscribe, click on the link below : • Trust Regulatory News • Trust Performance Report or • Fiduciary Earnings & Expenses Subscription request can also be sent to "circulation@trustupdates.com" or by calling 800-404-2116. • 1992-2014 Copyright© A.M. Publishing, Inc., Trust Regulatory News |