Additional thoughts on Rousey v. Jacoway:

To meet the federal bankruptcy exemption under § 522(d)(10)(E) which was the focus of the Rousey decision, a debtor’s right to receive payments from an IRA must constitute a:

“a payment under a stock bonus, pension, profit sharing, annuity, or similar plan or contract on account of illness, disability, death, age, or length of service, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor.” (11 USCS 522(d)(10)(E))

Commentators have been emphasizing that the “reasonably necessary” requirement of the bankruptcy exemption will lessen the benefits of the Supreme Court’s Rousey opinion for IRA holders with large amounts in their IRAs. They go on to note that qualified plans subject to ERISA will likely offer more protection for such debtors under the Patterson v. Shumate case than IRAs offer for debtors under the Rousey v. Jacoway case. (In other words, parking all of one’s qualified retirement plan money in an IRA might not be the wisest choice for wealthy individuals, when it comes to to the issue of protecting assets from bankruptcy.)

Other issues that have been raised by commentators:

(1) Would Rousey protect Roth IRAs? Maybe not.

(2) The effects of Rousey would depend on state law, since under the Bankruptcy Code, states can opt out of the federal exemptions and provide their own exemption, give debtors the choice between the federal exemptions or the state exemption, or limit debtors to the federal exemption.

(3) RIA reports on recent bankruptcy legislation:

“Sec. 224(e) of S. 256, the Senate-passed Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, would provide a comprehensive set of rules for retirement plans, IRAs, and Roth IRAs. In particular, it would exempt IRAs (other than SEPs and SIMPLE plans) and Roth IRAs to the extent that their aggregate value, without regard to amounts attributable to rollover contributions under Code Sec. 402(c) , Code Sec. 402(e)(6) , Code Sec. 403(a)(4) , Code Sec. 403(a)(5) , and Code Sec. 403(b)(8) , and earnings thereon, does “not exceed $1,000,000 in a case filed by a debtor who is an individual, except that such amount may be increased if the interests of justice so require.”

Article on the implications of Rousey:

Reish Luftman Reicher & Cohen: Rousey v. Jacoway: The Supreme Court Extends Bankruptcy Protection to IRAs, or Does It? (via Benefitslink.com)