In the case of Clark v. Rameker, the U.S. Supreme Court ruled that inherited Individual Retirement Accounts (IRAs) are not protected from creditors in bankruptcy under federal law. The court held that funds held in inherited IRAs do not constitute "retirement funds" within the meaning of a Bankruptcy Code provision exempting certain assets from the bankruptcy estate, and thus they are available to satisfy creditors' claims. This decision was based on several distinguishing features of inherited IRAs: beneficiaries cannot contribute additional income to these accounts; owners must withdraw money regardless of how many years they may be from retirement; and beneficiaries can take all funds out at any time without penalty unlike traditional IRA holders who face penalties for early withdrawals before age 59½.

In the dissenting opinion for Clark v. Rameker, Justice Sotomayor argued that the majority's interpretation of "retirement funds" was too narrow and failed to consider Congress' intent in creating bankruptcy exemptions. She contended that by focusing on who created the account rather than its purpose (to provide income during retirement), the majority undermined a key goal of bankruptcy law: allowing debtors to meet their basic needs while they get back on their feet financially. Furthermore, she pointed out inconsistencies in how different types of accounts would be treated under this interpretation - inherited IRAs would not be protected but other inherited retirement assets could still qualify as exempt property. This discrepancy, she believed, did not align with Congress’ intention when drafting these laws.