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Protection of Retirement Accounts from Creditor Claims

March 10, 2016 By tomwhitmore

Protection of Retirement Accounts from Creditor Claims

Nebraska law generally protects pension, profit-sharing, and similar retirement accounts from claims of creditors in bankruptcy and judgment creditors to the extent the funds contained therein are reasonably necessary for the support of the debtor or any dependent of the debtor. While Nebraska does not have a statute that specifically addresses IRAs, under a 1994 case, Individual Retirement Accounts are likewise protected from attachment and garnishment.

Under a June 2014 United States Supreme Court decision, however, inherited IRAs do not enjoy the same protection from creditors. In Clark v. Ramekers a unanimous Court ruled that inherited IRAs are not retirement funds for purposes of the federal bankruptcy statute. The effect of the ruling is to allow bankruptcy creditors to attach inherited IRAs.

I expect that Nebraska would follow Clark v. Ramekers, which is based upon the fact that inherited IRAs do not fit the usual meaning of “retirement accounts” because the individual cannot invest more money in the account and is required to draw money from the account regardless of how far the individual is from retirement.

Filed Under: Finances

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