If someone makes you a beneficiary of their IRA, are those funds exempt from claims by a Trustee or creditor. The Bankruptcy Court for the Western District of Wisconsin in the case of In Re Clark, ruled that the answer was no. The debtor had tried to exempt these funds by placing the funds in an account and claiming that the funds were entitled to an exemption as funds in the nature of “retirement funds”. The Trustee objected to the claimed exemption and the Bankruptcy Court agreed with the Trustee.

Fortunately, this is one case and there may be a different outcome by a different Court. The Court found that the funds were no longer being held in anticipation of retirement when the deceased died. When the funds were transferred to the debtor, they were no longer retirement funds and the debtor could not exempt the funds using an exemption on the basis that the funds were retirement funds.

If you are experiencing financial difficulties, you should meet with a bankruptcy attorney to make sure that those assets do not come to you and become part of your bankruptcy estate. Do not wait until you have to file to have this meeting with a bankruptcy attorney. It may simply be too late if you wait too long to have this meeting.


About Nathan Davis, Esquire

Born in Charleston, South Carolina, Nathan Davis has been practicing law for many years. Mr. Davis has a wide variety of experiences having practiced domestic relations, criminal law, social security law having also practiced collection law in the past. This knowledge is helpful when someone needs to restart their financial life. The practice is now primarily bankruptcy and debtor representation work, but, Mr. Davis continues to also practice real estate law, trusts and estates and a general litigation practice. I believe that the most important part of representation is trying to leave you better off when the case is finished than when you started. Although I will do as my client directs, I will always tell you if I think that you are making a mistake. Bankruptcy is about a "fresh start". If you do not make changes in what you are doing, you will be doing what you are doing now in the future. There is no shame in bankruptcy or other steps that you may take to start your life over. Too often, people worry more about things than about themselves, their family or their future.
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