Case Summary:
Chapter 7 debtors claimed wife’s interest in a beneficiary individual retirement account as exempt under both 11 U.S.C. § 522(b)(3)(C) and Wis. Stat. § 815.18(3)(j). Wife had received the account funds as a beneficiary after her mother, the owner of the IRA, died. The trustee filed a timely objection to the exemption, which was ultimately sustained by the bankruptcy court. In its ruling, the court held that funds contained in the “inherited IRA” were not “retirement funds” within the meaning of federal and state exemption law. The court reasoned that the funds in the inherited account were neither designated for the debtors’ retirement, nor were they currently held for wife’s deceased mother’s retirement. Additionally, the court found no persuasive legal source that concluded that inherited IRAs were indeed exempt from taxation under the internal revenue code.

Statute/Rule References:
11 U.S.C. § 522(b)(3)(C)
11 U.S.C. § 522(b)(4)(C)
26 U.S.C. § 408
Wis. Stat. § 815.18 -- Exemptions

Key Terms:
Federal and State Exemption Law
Inherited IRA
Taxes - Exempt