Court: Inherited IRAs not protected in bankruptcy

Posted Thursday, June 12, 2014 --- 10:13 a.m.

WASHINGTON (AP) -- The Supreme Court says Individual Retirement Accounts are not protected from creditors in bankruptcy proceedings if the accounts are inherited.

The justices ruled unanimously on Thursday that a Wisconsin woman who declared bankruptcy could not keep a $300,000 IRA that she inherited when her mother died.

Bankruptcy law typically shields retirement assets from creditors. But unlike a typical IRA, one that is inherited from a parent can be spent immediately without waiting for the new owner to retire. Lower courts said that change in the status of the account makes it less like retirement savings and more like a pot of money that should be available to pay off creditors.

The high court agreed.

Copyright 2014: Associated Press


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