Creditors Barred from Bankrupt's IRA

In a unanimous decision, Rousey v. Jacoway, the Supreme Court held that creditors may not reach IRAs for petitioners who file bankruptcy. This means IRA's are treated the same as other pension type plans for Bankruptcy purposes. As a basis for its decision, the US Supreme Court relies upon the access restriction to IRA assets under federal law. Specifically, the Court looks at the 10 percent excise tax penalty for premature withdraws prior to age 59 1/2 to say that, while the assets in the IRA are vested, the penalty is sufficiently draconian that the full value of the assets contained in the IRA is only available "on account of age" so it is excludable from the bankruptcy estate under 11 USC 522(d)(10)(E).

Popular posts from this blog

Bonus Depreciation under the new Tax Law can affect 2017 return

New Jersey Division of Taxation Closes Restaurant - leaving employees and customers stuck

Trump's tax plan