However as the types of retirement plans continued to proliferate, it became unclear if the law protected all retirement plans through bankruptcy, or only certain plans. In Clark v. Rameker, the United States Supreme Court clarified the law. Retirement accounts where the individual in bankruptcy put the money in the account will be protected; while, inherited retirement accounts will not be protected from creditors.
The US Supreme Court's held that inherited retirement accounts were different than personal retirement accounts, and that the law only protected one's own retirement accounts, not retirement accounts inherited from another; such as, inherited IRAs, 401(k)s, or 403(b)s.
This means that if you have an inherited IRA, 401(k), or 401(b), it could be taken in Chapter 7 and Chapter 13 bankruptcy, if you are not careful. Generally, if you inherited the IRA from a spouse, it will still be safe.
At Croke & Croke, we have significant experience in bankruptcy planning. We understand the types of accounts that are at risk and the types of accounts that are safe. We can offer solutions to protect these assets, if possible. Let us help protect your retirement accounts.
If you want to read the case, here is link to the case at the US Supreme Court's website:
Originally posted 12/15/14