Clark v, Rameker
November 26, 2013
Case #: 13-299
714 F.3d 559 (2013)
Full Text Opinion: http://media.ca7.uscourts.gov/cgi-bin/rssExec.pl?Submit=Display&Path=Y2013/D04-23/C:12-1241:J:Easterbrook:aut:T:fnOp:N:1123084:S:0
Bankruptcy Law: Whether non-spousal inherited IRAs are exempt from creditors' claims as "retirement funds" under Section 522 of the Bankruptcy Code.
Petitioners, a husband and wife, entered Chapter 7 bankruptcy, and argued that an IRA the wife inherited constituted “retirement funds” within the meaning of 11 U.S.C. § 522(b)(3)(C) and (d)(12), which exempts “retirement funds” from the claims of creditors. The bankruptcy judge determined that the inherited IRA was not “retirement funds” under § 522 and thus not exempt. The district court reversed, holding that where money is considered “retirement funds” in the hands of a decedent, it must be treated the same in the hands of her successor.
The Seventh Circuit reversed the decision of the district court. The court observed that unlike an ordinary IRA, the money in the inherited IRA would be available for Petitioner’s immediate consumption because Petitioners were required to begin withdrawing funds within one year of the mother’s death. Thus, the inherited IRA could not be considered “retirement funds” because the money would be available to Petitioner’s before they retired.On review, Petitioners note that the Seventh Circuit’s holding directly conflicts with the Fifth Circuit, and asks the Court to resolve a split among the circuits. The Supreme Court granted certiorari to decide whether non-spousal inherited IRAs are exempt from creditors' claims as "retirement funds" under Section 522 of the Bankruptcy Code.