United States Supreme CourtIn a unanimous ruling, Clark v. Rameker, the United States Supreme Court ruled that an individual retirement account that the debtor inherited, as opposed to having contributed to it on their own, does not fit within the federal bankruptcy exemption scheme, and therefore must be turned over to the trustee. There had been a split in authority amongst the various circuit courts on this issue, with the 8th circuit, where Minnesota is located, saying that it was exempt.

This does not change the fact that IRAs, to which a debtor has made regular contributions, are exempt up to an amount of $1 million per person, regardless of whether a person elects to protect their assets under federal or state law.

There is still a state statute which allows a person to protect “employee benefits,” including an individual retirement account, without all of the same language as the federal statute that was the question in this case, up to $69,000 per person. My hunch is that an inherited IRA will still not be exempt under the state statute, given the similarity between the purposes of these statutes, and the fact that the Supreme Court held that “inherited IRAs are not retirement funds.”

Here is a link to the Pioneer Press story.