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Individuals who seek protection under the federal Bankruptcy Code are provided two basic categories of exempt assets: federal statutory exemptions and exemptions provided for under the law of the state where the bankruptcy proceeding is filed. In addition, the Code provides an exemption for retirement funds in a tax-exempt account such as an individual retirement account (IRA). Earlier this summer, though, the U.S. Supreme Court ruled that not all IRAs — specifically, those that are inherited from a person other than a spouse — are not exempt from federal bankruptcy protection because they were not specifically set aside for the purpose of retirement for the person who inherited it.

Employee benefits attorney Jim Prince was interviewed by The Oklahoman about the high court’s ruling and what it means for Oklahomans.

“Oklahoma elected to preclude the use of the federal exemption list and opted to have its own list of exemptions apply,” said Prince. Because Oklahoma’s list of exempted assets include “any interest in a retirement plan or arrangement qualified for tax exemption or deferment purposes under present or future acts of Congress,” he said it is possible that an Oklahoma court could hold that an inherited IRA is exempt under Oklahoma’s statute. “However, to do so, the Oklahoma court would have to reject the reasoning of the U.S. Supreme Court.”