Supreme Court to rule on inherited retirement savings
Florida state and federal guidelines regarding bankruptcy filing do change from time to time and some policies are written in a way that allows for variations in interpretation and implementation. As a result, issues can arise over how bankruptcy law is understood and applied in some cases. Now that one individual bankruptcy case has resulted in several contradictory rulings in lower courts, the U. S. Supreme Court will decide how inherited retirement funds should be handled in bankruptcy proceedings.
One specific section of the bankruptcy code mandates that retirement funds may be exempt in bankruptcy filings if they are considered nontaxable. But because the guideline does not specify whether or not the un-taxable funds must be identified as the property of the bankruptcy petitioner in order to be protected, there is room for interpretation and controversy in applying the policy in real cases.
For instance, one couple was around $700,000 in debt when they filed for bankruptcy in 2010. The trustee overseeing the bankruptcy attempted to apply a substantial IRA fund that the wife had inherited to paying down the debt the couple owed, but the couple argued that the funds were exempt under the law.
Two contradictory rulings were made on the case before an appellate court agreed with the trustee. As a result, the U. S. Supreme Court recently heard the case and will now decide if inherited retirement funds are exempt in bankruptcy cases across the country. The federal ruling, whichever way it goes, will influence similar decisions made in lower courts in the future.
Source: digitaljournal.com, “US Supreme Court to decide bankruptcy case involving retirement funds,” April 5, 2014