As I have previously discussed, recently the Seventh Circuit Court of Appeals held that funds within an IRA are not necessarily retirement funds so the funds could not be shielded from creditors.The laws protect retirement funds so long as they are in atax-exempt account. The law does not define “retirement fund” so the court wasable to interpret the word claiming that funds that reach the hands of abeneficiary are no longer considered retirement funds. Because of thisinterpretation, the court limited the definition of “retirement funds.” Thecourt reasoned that if it chooses to exempt those funds it would allow assetsbeing used for current consumption to be guarded against creditors. Additionally,an inherited IRA is different than other retirement tools because the money inthe inherited IRA cannot stay in the IRA until retirement.
See Edwin Morrow III, Clark-Seventh Circuit Case Questions Inherited Retirement Plan Protection In Bankruptcy, The Journal, May 21, 2013.
Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.
