Supreme Court says inherited IRAs not protected from reach of creditors in bankruptcy
Source: Star Tribune
WASHINGTON 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.
Read more: http://www.startribune.com/politics/national/262872261.html
4Q2u2
(1,406 posts)If the person that inherites the money is not 62 or older then major penalties and added tax burdens are applied if the money is removed from the account. So in all acutallity that 300,000 could only be worth 200,000 in realized cash.
Counter that with personal assests of business owners that file for bancrupcy is protected and creditors are usually screwed.
http://www.slate.com/articles/business/moneybox/2009/12/everyones_defaulting_why_dont_you.html
Drew Richards
(1,558 posts)LLC not the person...
Corporations are people too except we get to keep all the fucking money "Don't Cha Know" Wink...
If Corporations are people too, then People are Corporations as well. Someone needs to file their personel taxes that way and challenge that abortion of a ruling. Equal protection and ALL.
question everything
(47,470 posts)I really like that comment: I will believe that corporations are people when one of them is put to death (in Texas, I suppose).
Nye Bevan
(25,406 posts)You might want to rethink your statement.
Nye Bevan
(25,406 posts)that provides for maintenance and upkeep of the beneficiary but is protected from creditors. Pretty easy to do and not that expensive.
question everything
(47,470 posts)while the middle class lose all.
DreamSmoker
(841 posts)Bump
24601
(3,959 posts)estate taxes would kick in and created our revocable living trusts over a decade ago. As I said, estate taxes aren't a factor - trusts keep your family from having to go through probate. I've attached the link to an article and here's an excerpt:
"On a national average the probate process takes from five to eight percent of your family estate out of the hands of your beneficiaries and gives it to the courts and other outside individuals. Planning with a trust can save the average American family about $30,000 in probate fees, attorney fees, and court costs alone, according to a national study by the AARP."
http://blog.virginiaelderlaw.com/2013/05/the-nightmare-of-probate-and-how-to-avoid-it/
The biggest asset in our trusts is our primary home - the only kind of home we have. My wife and I are the trustees and our immediate family - the two of us plus our two kids - are the beneficiaries. Death of a trustee, or trustees, doesn't trigger home ownership change since the trust lives on.
OKNancy
(41,832 posts)Many many middle income people have IRAs that are left to their beneficiaries. My in-laws were school teachers and they had an IRA that was divided up between two brothers. When you withdraw from the account it is taxed as income at your normal tax rate.