Shortly after I posted the item about IRA accounts being off limits in bankruptcy, I received this from a reader.

Subject: Re: Supreme Court: Creditors Can't Seize IRAs

 

I find it interesting that, like most, you focus on OJ's exemption of his *residence* equity when OJ also used Florida law to fully exempt another large asset: his NFL pension. I assume the $1 million cap on exempt pension assets in the bankruptcy bill is an anti-OJ provision, since I can't think of any other high-profile cases where a wealthy debtor used Florida's or Texas' unlimited pension exemption. Note that unlike homestead it has no safe harbor after which state law applies.

Given the defendant's modest means, I suspect this is a result-driven decision. I doubt the SC would have ruled the same way had a debtor with a $2 million IRA came before them even though the decision technically protects them too. Given that, I doubt they will give any relief for the BK bill's $1,000,000 cap, should it pass and a suitable case come before them.

I should note the BK bill has a serious flaw: the new federal caps on homestead and pension exemptions are not inflation-indexed. It won't take long for their value to be eroded significantly, and I suspect political will to revisit the bill and raise the exemptions will be quite lacking.

My Reply:

You have some very good points.

I guess the reason we focus on the homestead exemption more than the one for pensions is that it is easier for lawsuit fugitives, such as OJ, to plow money they want to shelter into the purchase of an expensive home than it is to legally add it to an existing pension plan.   

Kerry Kerstetter

 

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 4/17/2005 06:38:00 PM Send this post: