BAP Holds that an IRA from a Marital Property Settlement Is Not Exempt

Retirement accounts that a debtor received in a marital property settlement are not exempt in bankruptcy, according to an October 16 opinion by the Eighth Circuit Bankruptcy Appellate Panel. The case involved an individual retirement account and a 401(k) belonging to the debtor’s wife that he was to receive in a divorce proceeding. By extension, the principle stated by the BAP would seem to mean that a retirement account inherited from a deceased spouse likewise would not be exempt. Deceased or divorced, the decision cuts against nonworking spouses who end up in bankruptcy. The appeal turned on Clark v. Rameker, 134 S. Ct. 2242 (2014), where the Supreme Court ruled that a retirement account inherited from the debtor’s mother was not exempt under Section 522(b)(3)(C). That section exempts “retirement funds to the extent that those funds are in a fund or account that is exempt from taxation'' under specified provisions in the Internal Revenue Code.

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