Supreme Court considers personal bankruptcy case
Parents almost always work to fulfill the dream that their children will have more opportunities and even fuller lives than they themselves have had. As a result, many parents choose to save money in order to pass it onto their children. Parents often make extraordinary sacrifices when working to accomplish this goal. Unfortunately, one case currently being considered by the Supreme Court indicates that for some families, that effort may be in vain.
According to federal bankruptcy law, certain assets may be collected by trustees assigned to pay off a bankruptcy filer's debts. However, certain assets are off-limits to these trustees in order to ensure that some income and property remains upon which bankruptcy filers may rebuild their financial stability.
In the case before the Supreme Court, a woman who perished in 2001 had left her daughter money that she had saved in an IRA. The daughter chose to file for bankruptcy in 2010 after her small business was closed. The court-appointed trustee in the case believes that the inherited IRA money should be used to pay the woman’s debts, while the woman argues that this inherited money is protected from such uses.
At present, the instructions for such situations in the U.S. Bankruptcy Code are unclear. The Supreme Court now has a chance to clarify these instructions and to hopefully protect the hard-earned money that parents save for their children from being handed over to trustees in the event of bankruptcy. If you have any questions about how inheritances of all kinds may be treated under current bankruptcy law, please do not hesitate to speak to an experienced attorney.
Source: The Wall Street Journal, “U.S. Supreme Court Hears Bankruptcy Fight Over Inherited IRA Money,” Katy Stech, March 25, 2014