Rolled-Over Retirement Funds From Deceased Spouse Are Exempt Property

Rolled-Over Retirement Funds From Deceased Spouse Are Exempt Property

A debtor that rolls over the funds from a late spouse’s IRA into the debtor’s own IRA, can claim those funds as exempt under §522(b)(3)(C) of the Bankruptcy Code, according to the U.S. Bankruptcy Court for the Northern District of Iowa.

Although in Clark v. Rameker, 573 U.S. 122, 128-29 (2014), the U.S. Supreme Court held that inherited IRAs do not qualify for an exemption under §522(b)(3)(C), in this case the bankruptcy court noted that Clark distinguished between inherited funds and those that a surviving spouse rolls over into his or her own IRA.

The court thus concluded that the rolled over funds are subject to the same tax and bankruptcy rules as would apply to funds that the debtor had contributed herself.