《楊清泉律師專欄》Inherited retirement account is not exempt in bankruptcy(PART II)
楊清泉律師事務所
《楊清泉律師專欄》Inherited retirement account is not exempt in bankruptcy(PART I)
But what if you inherited your father’s IRA of $25,000? Can you exempt this IRA of $25,000 when you file your bankruptcy because it is an IRA after all? In Re Ard. Ann, the chapter 7 debtor claimed an IRA in Smith Barney as exempt. This IRA was established by the debtor’s father, who died ten years prior to the bankruptcy filing. On schedule B, debtor disclosed the inherited IRA as her personal property, claiming the retirement account exemption. At the 341A meeting of creditors, debtor confirmed the IRA of her father was worth more than $25,000. Trustee objected to the exemption. The court sustained the trustee’s objection stating that “The funds in the original IRA account did not retain the same tax exempt status after being distributed to the debtor. The axe consequences of this inherited IRA have nothing to do with her age or retirement status; she cannot contribute additional funds to the account, as a result, the inherited IRA does not qualify as an exempt account…” The court then ordered debtor to turn over the $25,000 to the Chapter 7 trustee.
Therefore, inherited retirement accounts are not exempt. To be exempt, these accounts must belong to debtor as his own IRA, 401K or 403 to which he can continue making contributions to.
Need relief from debt? Contact my office. I will analyze your case personally.
Lawrence Bautista Yang is a graduate of Georgetown University Law Center and has been in law practice for thirty years. He specializes in bankruptcy, business and civil litigation and has handled more than four thousand successful bankruptcy cases in California. He speaks Mandarin and Fujien and looks forward to discussing your case with you personally. Please call (626) 284-1142 for an appointment at 1000 S Fremont Ave Bldg A-1 Suite 1125 Unit 58 Alhambra, CA 91803.
But what if you inherited your father’s IRA of $25,000? Can you exempt this IRA of $25,000 when you file your bankruptcy because it is an IRA after all? In Re Ard. Ann, the chapter 7 debtor claimed an IRA in Smith Barney as exempt. This IRA was established by the debtor’s father, who died ten years prior to the bankruptcy filing. On schedule B, debtor disclosed the inherited IRA as her personal property, claiming the retirement account exemption. At the 341A meeting of creditors, debtor confirmed the IRA of her father was worth more than $25,000. Trustee objected to the exemption. The court sustained the trustee’s objection stating that “The funds in the original IRA account did not retain the same tax exempt status after being distributed to the debtor. The axe consequences of this inherited IRA have nothing to do with her age or retirement status; she cannot contribute additional funds to the account, as a result, the inherited IRA does not qualify as an exempt account…” The court then ordered debtor to turn over the $25,000 to the Chapter 7 trustee.
Therefore, inherited retirement accounts are not exempt. To be exempt, these accounts must belong to debtor as his own IRA, 401K or 403 to which he can continue making contributions to.
Need relief from debt? Contact my office. I will analyze your case personally.
Lawrence Bautista Yang is a graduate of Georgetown University Law Center and has been in law practice for thirty years. He specializes in bankruptcy, business and civil litigation and has handled more than four thousand successful bankruptcy cases in California. He speaks Mandarin and Fujien and looks forward to discussing your case with you personally. Please call (626) 284-1142 for an appointment at 1000 S Fremont Ave Bldg A-1 Suite 1125 Unit 58 Alhambra, CA 91803.
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