The US Supreme Court has spoken on inherited IRAs this past summer and has not given them the same favorable treatment that regular IRAs receive in bankruptcy. (The Circuits were previously split on this issue). It is an open question as to how the New Jersey IRA statute will be interpreted in light of the US Supreme Court ruling and whether debtors can still use state law to keep the debtor's IRA away from the trustee and creditors. Whoever litigates the next big inherited IRA case in NJ will probably make law. There is a big difference between an "excluded asset" and an asset which may be exempt. An excluded asset never become an asset of the bankruptcy estate and does not have to be exempted. That distinction may be a big issue in how the court frames the issue.
The bankruptcy implications are separate and apart from the implications of whether a creditor can attach an IRA or an inherited IRA outside of bankruptcy. I would suggest that state law would control. Again, in light of the Supreme Court's ruling, the next big case will probably make law in NJ.
Richard M. Schlaifer, Esquire
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Original Message------
FYI:
Chilton, et al. v. Moser, No. 11-40377 (5th Cir. 2012)
Justia Opinion Summary This case arose when debtors inherited an IRA worth $170,000. When debtors filed for bankruptcy, they sought to exempt the inherited IRA from the bankruptcy estate pursuant to 11 U.S.C. 522(d)(12). The Chapter 7 trustee objected to the exemption, arguing that inherited IRAs did not qualify for exemption under section 522(d)(12). After the bankruptcy court ruled for the trustee, the district court reversed the bankruptcy court. Because the court held that inherited IRAs were exempt from the bankruptcy estate, upon de novo review, pursuant to section 522(d)(12), the court affirmed the district court's judgment.
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Jenny Berse Esq.
Cranford NJ
(855) FAM-LAW1
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Original Message:
Sent: 12-02-2014 13:17
From: Carolyn Hand
Subject: Inherited IRAs
It is my understanding that inherited IRAs are not exempt from judgment creditors...does anyone know the statutory cite for this?
TIA
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Carolyn Hand Esq.
Denville NJ
(973)537-1700
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