Inherited IRAs Not Protected in Bankruptcy

Misty A. Watson

By Misty A. Watson



Co-authored by Misty Watson and Samantha Maerz

If you directly inherited an IRA and are facing bankruptcy, these funds are no longer protected from creditors.

In Clark v. Rameker (In re Clark), No. 13-299, the U.S. Supreme Court unanimously ruled that inherited IRAs do not qualify under the “retirement funds” bankruptcy exemption. As a result, non-spouses inheriting an IRA may no longer protect the funds from creditors after filing bankruptcy and spouses have more incentive to “roll over” inherited IRA funds.

Before the Supreme Court decided Clark, there was a split between the 5th and 7th Circuit Courts of Appeals regarding exactly what the “retirement funds” bankruptcy exemption covered. In Chilton v. Moser, the 5th Circuit previously held that inherited IRAs were exempt from the bankruptcy estate because the “retirement funds” exemption never stated that the retirement funds had to be the debtor’s. In Clark v. Rameker, the 7th Circuit disagreed and held that inherited IRAs were not exempt because they were an “opportunity for current consumption, not a fund of retirement savings.” The disagreement stemmed from the interpretation of what “retirement funds” included. Continue reading »

Estate Planning for Young Professionals: Why Considering Your Death is Important Even at this Age

David A. Zobel

By David A. Zobel



Part of a monthly multi-part series of discussions aimed at explaining legal and financial considerations for young professionals as they establish and develop their careers, relationships and lives

It’s probably a safe bet that most people in their twenties and thirties have not given much thought to estate planning. Short of a first child or a friend asking if you want life insurance, planning for what will happen when you die probably hasn’t come up and why should it? You’ve got youth and health on your side. Moreover, you probably don’t have a lot of assets at this point.

So why is it important? I asked estate planning attorney Misty Watson to help explain. According to Watson,

“Planning for the future encompasses much more than where your property goes upon your death. Estate planning can also cover who handles your finances if you are out of town, who makes medical decisions for you in the event you become incapacitated, and who becomes your guardian if a court declares you incompetent.”

With these thoughts in mind, you may want to reflect upon the following considerations:

What Happens to My Assets?

You have more than you think you have. Even if you don’t own a home or a wall safe full of bullion, you still have assets and they need to be distributed somehow and to someone. Consider the following examples: bank accounts, savings accounts, stock, bonds, 401ks, IRAs, other retirement accounts, automobiles, clothes, art, appliances, and furniture. Chances are you have at least one of these things and more than likely you have a few. Maybe you’d like your friend to get your watch or a fund be set aside for your nephew’s college fund. Estate planning assists in sorting out who gets what and when.

What Happens to My Children?

If you have children and are single, chances are you may have spoken with someone about taking care of your children in the event you pass. However, without any sort of document proving these intentions, how will the State know what to do? If you are married with children, your spouse will take on the responsibility, but what if you die at the same time? Or get divorced? Your children’s future should be your decision and not left up to the State or a court system.

Continue reading »

Back to School Time for Children with Special Needs

Misty A. Watson

By Misty A. Watson



The Illinois Suburban Journal has posted a great article on “Unique first day pressures face kids with special needs.”

Changes in routine can be upsetting for any child with special needs, especially a child with autism.

Prior to the first day of school, if you have a child with special needs, it’s probably a good idea to communicate with the school to set up a time for you and your child to meet the new teacher and see the classroom. The teacher should spend enough time with you and your child to walk through what the new routine will be this school year.

Spending time establishing a relationship with your child’s teacher will help you, your child, and the teacher understand better how to ease your child into that first day of school. If your child’s teacher learns about your child’s special triggers and sensitivities before the first day of school, it can make the transition much better. It can also help the teacher help prepare better for your child if special preparation needs to be made, such as extra visual charts for the class schedule, as suggested in the Journal article.

Once school is underway, your child’s special services will begin. When your special needs child attends public school and is receiving special educational services, the school is required to provide your child with an individualized education plan (IEP). An IEP must be updated yearly to ensure that a child is receiving the necessary services to achieve that child’s goals. It will be important to educate yourself about the IEP process and what can and should be included in your child’s plan.

When you have a child with special needs, you will have to continue to advocate for your child throughout his or her educational process. At times, it will feel like a never ending battle with the school to ensure that your child is receiving necessary services.

But in the end, it is up to you to stay on top of your child’s educational process. Consult the experts, attend seminars your school district provides, and be your child’s educational advocate.

Posted by Attorney Misty A. Watson. Watson’s practice focus is estate-related: planning, administration, and probate. She creates trusts, wills, financial, and health care powers of attorney, guardianships, and conservatorships.