Joel R. Glucksman
Partner
201-896-7095 jglucksman@sh-law.comKey Contacts
Back
The Supreme Court ruled June 12 that inherited individual retirement accounts, also known as inherited IRAs, are not protected from creditors in bankruptcy proceedings, according to Reuters. As baby boomers die and pass on their assets to their children, this ruling is likely to have wide-reaching effects.
The case before the Supreme Court began in March, and centers around a 2010 bankruptcy, declared by Heidi Heffron-Clark and husband Brandon Clark when their shop closed, the news source explained. The Clarks held approximately $300,000 in an IRA that Heffron-Clark had inherited from her mother nine years prior. They owed roughly $700,000 to their creditors.
Generally, IRAs are protected from creditors in a bankruptcy under the umbrella of protecting debtors’ “essential needs,” according to Reuters. Retirement security is considered to be an essential need, but the trustee administering the Clarks’ estate felt that key differences to an IRA that is inherited meant that it does not fall under the purview of this category.
“Nothing about the inherited IRA’s legal characteristics would prevent (or even discourage) the individual from using the entire balance of the account on a vacation home or sports car immediately after her bankruptcy proceedings are complete,” the ruling said, according to the news source.
The most notable effects of this ruling apply to spouses, Forbes explained. In the event that a spouse dies and leaves an IRA to his or her surviving spouse, that spouse has two options – rolling the IRA into his or her own IRA, or taking that money out. This ruling provides yet another incentive for the surviving spouse to rollover the IRA, because this is the only circumstance in which it would be protected from a potential bankruptcy.
If you have any questions about this post or would like to discuss your company’s creditors’ rights and bankruptcy matters , please contact me, Joel R. Glucksman at ScarinciHollenbeck.com.
- Practices: Corporate Transactions & Business
- Locations: Red Bank, NJ, New York City, Little Falls, NJ
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Related Posts
See all
Why Compliance Monitoring Matters for NY and NJ Businesses
Compliance programs are no longer judged by how they look on paper, but by how they function in the real world. Compliance monitoring is the ongoing process of reviewing, testing, and evaluating whether policies, procedures, and controls are being followed—and whether they are actually working. What Is Compliance Monitoring? In today’s heightened regulatory environment, compliance […]
Author: Dan Brecher
When Are New Jersey Business Owners Personally Liable for Corporate Debt?
New Jersey personal guaranty liability is a critical issue for business owners who regularly sign contracts on behalf of their companies. A recent New Jersey Supreme Court decision provides valuable guidance on when a business owner can be held personally responsible for a company’s debt. Under the Court’s decision in Extech Building Materials, Inc. v. […]
Author: Charles H. Friedrich
Commercial Real Estate Trends to Watch in 2026
Commercial real estate trends in 2026 are being shaped by shifting economic conditions, technological innovation, and evolving tenant demands. As the market adjusts to changing interest rates, capital flows, and workplace models, investors, owners, tenants, and developers must understand how these trends are influencing opportunities and risk in the year ahead. Overall Outlook for Commercial […]
Author: Michael J. Willner
One Big Beautiful Bill: New Tip Income Tax Rules Employers & Workers Need to Know
Part 2 – Tips Excluded from Income Certain employees and independent contractors may be eligible to deduct tips from their income for tax years 2025 through 2028 under provisions included in the One Big Beautiful Bill. The deduction is capped at $25,000 per year and begins to phase out at $150,000 of modified adjusted gross […]
Author: Scott H. Novak
One Big Beautiful Bill: New Overtime Tax Rules Employers and Employees Need to Know
Part 1 – Overtime Pay and Income Tax Treatment Overview This Firm Insights post summarizes one provision of the “One Big Beautiful Bill” related to the tax treatment of overtime compensation and related employer wage reporting obligations. Overtime Pay and Employee Tax Treatment The Fair Labor Standards Act (FLSA) generally requires that overtime be paid […]
Author: Scott H. Novak
New York’s FAIR Business Practices Act: What the New Consumer Protection Measure Means for Your Business
In 2025, New York enacted one of the most consequential updates to its consumer protection framework in decades. The Fostering Affordability and Integrity through Reasonable Business Practices Act (FAIR Act) significantly expands the scope and strength of New York’s long-standing consumer protection statute, General Business Law § 349, and alters the compliance landscape for New York […]
Author: Dan Brecher
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.