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IRAs and Joint Bank Accounts Are 'Available Funds' Under CJA

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By Gabriella Khorasanee, JD on September 11, 2013 3:53 PM

Joseph Konrad pleaded guilty to charges of making false statement to the Federal Aviation Administration in 2010. Based on the information he disclosed in a financial disclosure affidavit, he was assigned a federal defender pursuant to the Criminal Justice Act.

During sentencing, the district court noted differences between Konrad's affidavit and presentencing report. Based on the discrepancies he was ordered to reimburse $6,000 in legal fees because he in fact, had funds to pay for an attorney.

Necessities of Life

A defendant bears the burden to show that he does not have available funds to pay for legal counsel. Whether a defendant has available funds depends on whether he has enough funds to exceed coverage for the "necessities of life."

Control of the Funds

At issue were Konrad's IRA funds and joint bank account. Regarding the IRA funds, the court refused to categorize them as future income and instead held that it was an accumulation of prior income with delayed taxation. Konrad argued that because of the early-withdrawal penalty, he would suffer extreme hardship. The court disagreed. The Third Circuit found that the IRA was sufficiently liquid, and that even with the penalty, Konrad would still have 10 times the amount of the legal fees he was ordered to pay.

Regarding the bank account Konrad held jointly with his wife, the court also found these funds to be fair game. Because Konrad could withdraw the funds, without prior consent, they were found to be in his control. Because his IRA account, together with his joint bank account had more than enough to cover legal fees, the court found he had available funds.

Repayment of Legal Fees

Konrad argued that the amount he had to reimburse in legal fees should be set by the $125 public defender rate, rather than the $400 market rate for legal counsel. The court disagreed and found that he should not benefit from his dishonesty and receive discounted legal representation.

Protecting Your Nest Egg

The Third Circuit's opinion is a blow to people who have been saving all of their lives for their retirement. Of course, the situation is easily avoidable if one doesn't violate any federal laws. However, if you were to advise clients on protecting their retirement savings, perhaps a product that took the funds out of the retirees' full control would be a place to start.

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