Inherited IRA Exempt from Bankrupty…what about Clark v. Rameker?

Michael Arehart (“Arehart”) was the designated beneficiary on his mother’s IRA.  When his mother died, those funds were transferred to an inherited IRA for Arehart’s benefit.  Shortly after the receipt of the inherited IRA, Arehart filed a voluntary petition for chapter 7 bankruptcy relief.

Arehart claimed the inherited IRA was wholly exempt pursuant to Idaho Code § 11-604A

The Trustee argued that the inherited IRA, based on Clark v. Rameker, 573 U.S. 122 (2014), was not exempt.

Arehart argued that the Idaho statute is not as narrowly written as the statute interpreted in Clark, relying on In re McClelland, 2008 WL 89901 (Bankr. D. Idaho 2008), which held that inherited IRAs are exempt under Idaho Code § 11-604A.  Unlike the statute described in Clark, the Idaho statute does not require a finding that the funds in the account or plan be “retirement funds;” rather, the language that the Idaho legislature used to create the exemption captures more than an individual account owner’s retirement income and includes the beneficiary’s interest in an inherited account as well.

Relying on McClelland, the Court found that Idaho Code § 11-604A is written broadly enough so as to encompass inherited IRAs, exempting them from bankruptcy.

Bloomberg Law. Case: Inherited IRA Exempt from Bankruptcy Under State Law (Bankr. D. Idaho) (IRC § 408), Jan. 15, 2019.

 

In re Arehart, No. 17-01678-TLM (Bankr. D. Idaho Jan. 10, 2019).

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