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Rules protecting retirement accounts from lawsuit.
Old 10-29-2020, 05:50 AM   #1
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Rules protecting retirement accounts from lawsuit.

The recent UIM insurance thread, that I seem to have added Umbrella policy questions to (sorry) has me wondering if or how well Retirement accounts are protected from lawsuits. I have read the articles below and it seems they do get pretty good protect, however some states protect better than others. I added an article about Florida because that's where I live. Florida is high on the protective list.
About 1/3 of our nest egg is outside of retirement accounts.



https://www.investopedia.com/article...t-lawsuits.asp


https://www.investopedia.com/article...-creditors.asp


https://www.floridaestateplanninglaw...rom-creditors/
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Old 10-29-2020, 06:33 AM   #2
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FWIW - My understanding is that 401(k)'s are "protected" uniformly in all 50 states, but IRAs vary on a state by state basis.

Another potential reason not to roll over that you will likely not hear from the financial industry.



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Old 10-29-2020, 07:15 AM   #3
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From my understanding, ERISA accounts are fully "protected" from bankruptcy or garnishment. You can still be hit with a court award of say 1 million. You would have had to ignore the court order and not pay (forever) , or file bankruptcy.

Federally, IRA's and Roth IRAs are currently protected in bankruptcy up to $1,362,800 (https://www.thebankruptcysite.org/ex...s/federal.html) That amount is adjusted year to year. States' laws vary on these accounts.

I may be misunderstanding this. Do not use this info for your financial planning. Seek confirmation.
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Old 10-29-2020, 10:14 AM   #4
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My impression is that ERISA is the gold standard . Except for IRS and spouse (QDRO), 401Ks are pretty battleship- hardened in most circumstances so I am planning to leave the company plans where they are esp. since they also have low cost index funds.

From OP's 2nd link:
"Although IRAs are not ERISA-qualified, the funds are protected under a separate law—the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA)—but only if you file for bankruptcy." This appears like weaker protection since you have to file for bankruptcy (unlike for 401Ks) .

http://moranknobel.com/news/State_La...cting_IRAs.pdf
It is not clear to me whether the state exemption for IRAs/Roths depends on filing for bankruptcy.




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