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April 04, 2005 at 08:00 PM
The U.S. Supreme Court today gave life insurers and others a long-sought victory by adding a layer of protection to Americans’ retirement savings.[@@]
The court ruled assets in individual retirement accounts normally are exempt from seizure by bankruptcy creditors.
The court’s unanimous decision, written by Justice Clarence Thomas, came in a case involving an Arkansas couple forced into bankruptcy by illness and unemployment. The spouses are 60 and 57.
The couple accumulated $55,000 in retirement savings in an employer-sponsored plan, then rolled the cash into IRAs when they lost their jobs.
A bankruptcy court, a bankruptcy appellate court and an 8th U.S. Circuit Court of Appeals decision all held that the couple had to include the IRA assets in their bankruptcy estate and use the assets to repay creditors.
The lower courts said the IRAs gave the couple no right to receive payment “on account of age,” because funds in IRAs can be withdrawn before age 59.5, with a penalty.
