Individual retirement accounts (IRAs), including Roth IRAs, are not protected by the federal government under ERISA. The only exception is in the case of bankruptcy. No one expects them to demand it, but it happens all the time. You spend your life working hard to get your retirement savings and you don't want to lose them in a lawsuit.
Fortunately, you can keep your retirement accounts protected if you stay proactive. At Blake Harris Law, our experienced asset protection lawyers aim to help you protect your assets from lawsuits. . Read on to learn if you need to take any steps to protect your individual retirement account.
The ruling did not specify an exact number, so individual judges can use their best discretion when determining excess funding. Average employed people don't usually exceed the creditor protection laws of IRAs, although business owners do. If your company is at greater risk of filing lawsuits, you should consider hiring a financial planner or lawyer to discuss your options. If someone slips and falls in your tent or runs away, they could sue.
The most common type of lawsuit affecting retirement accounts comes from unpaid tax debts with the Internal Revenue Service (IRS), which violates the Internal Revenue Code. If a person or company files for bankruptcy, the judicial creditor can request the funds due a few months after the debtor comes forward. The debtor of the judgment could lose some retirement assets, depending on the state, sums deposited, inherited IRAs, and more. State laws generally try to protect people from losing all the funds in their retirement accounts because of a lawsuit.
For example, California dictates that the court cannot grant creditors in judgment (or anyone filing the lawsuit) funds from a retirement account that generate unreasonable living standards. The safest states to protect IRA funds are Arizona, Texas and Washington. Arizona state laws only allow a judicial creditor to request retirement funds during bankruptcy starting with the last 120 days of contributions, which means that all of the above have 100% legal protection. Other states, such as New Hampshire and New Mexico, offer no regulation that protects retirement assets from judicial creditors.
In such areas, the debtor of the judgment must rely on federal bankruptcy law and other previous mandates to stay protected from creditors. Some people may choose an individual retirement annuity, a traditional IRA, an accumulated IRA, a Roth IRA, a simplified employee pension plan (SEP) or a simple IRA, depending on their retirement planning needs and what their employer sponsors. For example, simple IRAs allow employees and business owners to contribute to the same retirement fund account. Accumulated IRAs allow you to transfer IRA assets from the sponsorship of a previous employer to a new retirement plan.
A pension plan provides retirement income that the employer funds. Each type of IRA has different levels of protection against lawsuits. Inherited IRAs and accrued benefits usually offer the least protection to creditors, while a regular Roth IRA includes more federal and state protection. The Retirement Income Security Act of 1974 provides some protection to retirement plans such as 401 (k), 403 (b) and pension plans.
The IRS and legal spouses are the only threats to employer-sponsored 401 (k) plans. Otherwise, any lawsuit you receive won't affect your 401 (k) plan's retirement benefits. Often, when a person or company accumulates excessive debt, creditors seek their assets to cover installments. To avoid the seizure of assets, many chose to file for bankruptcy.
The Federal Bankruptcy Code outlines different methods of protecting against bankruptcy to help those who have problems with debts so that they don't lose everything. Bankruptcy generally results in a reduction in total debt or in the seizure of assets, depending on what you owe. The bankruptcy court will consider your current income and assets compared to your obligation to determine how much you can reasonably pay over the course of your life. Taking proactive steps to protect your IRA will help you avoid massive legal complications in the future.
For example, your state could eliminate a protected funds law that puts your money at risk. Relying on creditor protection under state or federal law can cause you problems, as exceptions to these rules apply. Instead, we recommend that you take legal action now to keep your IRA safe. In doing so, you have a few options.
National Asset Protection Trusts (DAPT) are irrevocable trusts that allow you to deposit your earnings in the name of the trust while remaining the primary beneficiary. Since these assets no longer exist in your name, they enjoy greater protection for creditors. As a beneficiary, you can still access the money at almost any time. Keep in mind that certain states have different laws regarding DAPTs.
Most require a trial period in which the money will not be protected, so debtors cannot fund a trust after receiving a lawsuit. In addition to this rule, many other exceptions may apply, so you should talk to your lawyer about the right option for your needs. Some people also deposit their savings in an offshore asset protection trust as an alternative to the previous domestic option. Self-liquidated offshore asset protection trusts are irrevocable and have an independent trustee.
The main advantage of opting for the high seas is to avoid the U.S. UU. The most popular areas for creating offshore trusts include the Cook Islands and St. We recommend discussing this option with an asset protection attorney before proceeding with anything.
Foreign accounts involve complex laws and regulations that require professional advice. At Blake Harris Law, we have extensive experience helping clients resolve their legal issues without losing all of their savings. Whether you're facing a lawsuit or not, we recommend that you protect your hard-earned money so you can enjoy your retirement. The easiest way to avoid legal problems is to think, plan and stay ahead of the curve and practice the proactive measures mentioned above.
When you're ready to protect your future, contact our team at Blake Harris Law at 833-ASK-BLAKE or complete our online form to speak with an attorney experienced in asset protection planning. Therefore, all of the assets in that trust, including inherited IRA funds, receive legal protection from the beneficiary's creditors after the death of the owner of the IRA. Below is the required jargon that should be added to any item renamed Ed Slott and Company, LLC or IRA Help, LLC. Although IRAs do not meet the requirements of ERISA, the funds are protected by a separate law, the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), but only if you file for bankruptcy.
Roth IRA, minimum required distribution, tax planning, RMD, IRS, IRA, 401 (k), inherited IRA, Mailbag, Ed Slott, IRA contribution, retirement planning, conversion to Roth IRA, IRA renewal, qualified charitable distribution, IRA distribution, IRA beneficiary, marvin Rotenberg, QCD, 60-day IRA renewal. Among the lesser-known benefits is the legal protection of IRA funds against creditor claims when an IRA owner files for bankruptcy. The Supreme Court, in a decision that surprised many, held that, after the death of the owner of an IRA, the assets of an IRA inherited from a non-spousal beneficiary no longer constitute retirement funds for bankruptcy purposes; therefore, they are not protected from creditor claims when a non-spousal beneficiary files for bankruptcy. For example, several states, such as Alaska, Arizona, Florida, Missouri, North Carolina, Ohio, South Carolina, and Texas, offer their own bankruptcy protection for inherited IRAs.
Under normal bankruptcy rules, IRA funds are not subject to creditors' claims in technical language, but are exempt from inclusion in the bankruptcy estate. This protection against creditors of an IRA will not apply to anyone who uses their retirement accounts for prohibited purposes, such as committing to receive a loan. Common types of non-ERISA retirement accounts are individual retirement accounts (IRAs) without substantial employer involvement, such as the traditional IRA and the Roth IRA. In addition, creditors to whom you owe money cannot file a claim against the funds held in your retirement account.
Some states, for example, protect IRAs in almost all cases, while others only offer limited protection. .