Asset Protection Planning
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Whether you have a traditional IRA, a Roth IRA, or both, you should be aware that the IRA creditor protection by state varies. That is, there are different statutes and case law in each state and region. Below is a summary of our research. You can look at the chart below and see the manner in which various states protect IRAs. Below, you will see the diverse IRA judgment creditor exemptions by state (at the time of this writing). Additionally, exemptions exist at the federal level that may be different than those at the state level. Therefore, the use of an IRA may be thought of as a small part of an overall asset protection plan.
You can use the guide below as a handy reference. If you are aware of any statutory updates to the IRA creditor exemption laws that we have not yet updated, please use the inquiry form or number on this page to notify us.
Below is a table that shows IRA creditor protection by state. Each state is different with regard to the extent by which IRAs are protected. So, use the list below to see if your state offers the exemption for the traditional or Roth IRA.
Roth IRA Creditor Protection?
|Alabama||Ala. Code §19-3B-508||Yes||Yes|
|Alaska||Alaska Stat. §09.38.017||Yes||Yes||The Alaska IRA creditor protection exemption doesn’t include amounts that were contributed within 120 days prior to the debtor filing for bankruptcy. (Provides for exemption of inherited IRAs.)|
|Arizona||Ariz. Rev. Stat. §33-1126(B)||Yes||Yes||The Arizona exemption doesn’t apply to a claim by an alternate payee under a qualified domestic relations order (QDRO). A QDRO is part of a property division in a divorce or legal separation that splits a retirement plan or pension plan between spouses. The interest of an alternate payee is exempt from claims by creditors of the alternate payee. The exemption doesn’t include amounts contributed within 120 days before a debtor files for bankruptcy. (Provides for exemption of inherited IRAs.)|
|Arkansas||Ark. Code §16-66-220||Yes||Yes||A bankruptcy court has ruled that the creditor exemption for IRAs violates the Arkansas Constitution. This ruling was with respect to contract claims.|
|California||Cal. Code of Civ. Proc. §704.115||Partly||No||IRAs are exempt only to the extent necessary to provide for the support of the judgment debtor when the judgment debtor retires as well as for the support of the spouse and dependents of the judgment debtor. This takes into account all resources that are likely to be available to support the judgment debtor when the judgment debtor retires. If other means of support are determined courts can order IRA seizure.|
|Colorado||Colo. Rev. Stat. §13-54-102||Yes||Yes||Any retirement benefit or payment is subject to attachment or levy in satisfaction of a judgment for back child support. Any pension or retirement benefit is also subject to attachment or levy in satisfaction of a judgment awarded for a felonious killing.|
|Connecticut||Conn. Gen. Stat. §52-321 a||Yes||Yes|
|Delaware||Del. Code Ann. tit. 10, §4915||Yes||Yes||An IRA is not exempt from a claim made under Title 13 of the Delaware Code, which is the title that pertains to domestic relations orders.|
|Florida||Fla. Stat. §222.21||Yes||Yes||An IRA is not exempt from a claim of an alternate payee under a QDRO or claims of a surviving spouse pursuant to an order determining the amount that a surviving spouse of a deceased may claim as well as and contribution to the IRA. Florida provides a specific exemption for inherited IRAs. (Provides for exemption of inherited IRAs.)|
|Georgia||Ga. Code §44-13-100||Yes||No||Distributions from IRAs are exempt only to the extent necessary for the support of the debtor and any dependent.|
|Hawaii||Haw. Rev. Stat. §651-124||Yes||Yes||The exemption does not apply to contributions made to a plan or arrangement within three (3) years before the date of a bankruptcy or a civil action is initiated against the debtor.|
|Idaho||Idaho Code §55-1011||Yes||Yes||The exemption only applies to claims of judgment creditors of the beneficiary or participant arising out of a negligent or otherwise wrongful act or omission of the beneficiary or participant resulting in money damages to the judgment creditor.|
|Illinois||735 III. Comp. Stat. 5/12-1006||Yes||Yes|
|Indiana||Ind. Code §34-55-10-2(6)||Yes||Yes||(Provides for exemption of inherited IRAs.)|
|Iowa||Iowa Code §627.6(8)||Yes||Yes|
|Kansas||Kan. Stat. §60-2308||Yes||Yes|
|Kentucky*||Ky. Rev. Stat. §427.150(2)(f)||Yes||Yes||The Kentucky IRA creditor protection exemption doesn’t include any amounts contributed to the IRA if the contribution occurred within 120 days before the debtor filed for bankruptcy. In addition, the exemption does not include the right or interest a has person in an IRA to the extent that right or interest is subject to a court order for payment of maintenance or child support. However, under 471.150 (1) the IRA is only exempt “…to the extent reasonably necessary for the support of an individual and his dependents…” meaning if a judge finds the debtor can support self through other means, courts could order IRA seizure.|
|Louisiana||La. Rev. Stat. §§20-33(1) and 13-388KD)||Yes||Yes||No contribution to an IRA is exempt if made less than one calendar year from the date of filing bankruptcy. This applies whether the filing was voluntary or involuntary, or the date writs of seizure are filed against the account. Additionally, the exemption doesn’t apply to liabilities for alimony and child support.|
|Maine||Me. Rev. Stat. tit. 14, §4422(13)(F)||Partly||No||IRAs are exempt only to the sum of $15,000 or to the extent reasonably necessary for the support of the debtor and any dependent(s).|
|Maryland||Md. Code Cts. & Jud. Proc. §11-504(h)||Yes||Yes||IRAs are exempt from any and all claims of creditors of the beneficiary or participant other than claims by the Department of Health and Mental Hygiene.|
|Massachusetts||Mass. Gen. Laws ch. 235, §34A||Yes||Yes||The exemption doesn’t apply to a court order that includes divorce, separate maintenance or child support. It also does not apply to a court order requiring an individual convicted of a crime to satisfy a monetary penalty or to make restitution, or sums deposited in a plan in excess of 7% of the individual’s total income within five years of his or her declaration of bankruptcy or entry of judgment.|
|Michigan*||Mich. Comp. Laws §600.6023(j)||Yes||Yes||The Michigan state IRA creditor protection exemption does not include amounts contributed to an IRA or individual retirement annuity if the contribution occurs within 120 days before the debtor files for bankruptcy. Additionally, the exemption does not apply to an order of the domestic relations court or nondeductible contributions to an IRA.|
|Minnesota||Minn. Stat. §550.37(24)||Yes||Yes||Exempt to a present value of $69,000 and additional amounts reasonably necessary to support the debtor, spouse, or dependents.|
|Mississippi||Miss. Code §85-3-1||Yes||No|
|Missouri||Mo. Rev. Stat. §513.430.1||Yes||Yes||If a Ch. 11 bankruptcy is filed by or against the debtor, no amount of the funds are exempt in the proceedings under any plan or trust that is fraudulent as defined in Section 428.024 of the Missouri Revised Statutes, and for the period such person participated within three years prior to the Ch. 11 filing. (Provides for exemption of inherited IRAs.)|
|Montana||Mont. Code §31-2-106(3)||Yes||No||The exemption doesn’t include the portion of contributions made by the individual within one year before the filing bankruptcy that exceeds 15% of the gross income of the individual for that one-year period.|
|Nebraska||Neb. Rev. Stat. §25-1563.01||Partly||No||The debtor’s right to receive IRAs and Roth IRAs is exempt to the extent reasonably necessary for the support of the debtor and any dependent of the debtor.|
|Nevada||Nev. Rev. Stat. §21.090(1 )(r)||Yes||Yes||The exemption is limited to $500,000 in present value in an IRA that complies with Sec. 408 or 408A.|
|New Hampshire||N.H. Rev. Stat. 52 §511:2||Yes||Yes||The exemption only applies to extensions of credit and debts that arise after Jan. 1, 1999.|
|New Mexico||N.M. Stat. §§42-10-1,-2||Yes||Yes||A retirement fund that supports the IRA holder or another individual is exempt from receivers or trustees in bankruptcy or other insolvency proceedings, fines, attachment, execution, or by foreclosure from a judgment creditor.|
|New Jersey||N.J. Stat. 25:2-1 (b)||Yes||Yes||(“The Inherited IRA constitutes a ‘qualifying trust’ under N.J.S.A. 25:2-1(b), and is therefore excluded from Debtor’s bankruptcy estate.”)|
|New York||N.Y.C.P.L.R. 5205(c)||Yes||Yes||Contributions to IRAs are not exempt from judgments that were made after a date that is 90 days before the filing of the claim from which the judgment was entered.|
|North Carolina||N.C. Gen. Stat. § 1C-1601 (a)(9)||Yes||Yes||There are specific exemption for inherited IRAs. (Provides for exemption of inherited IRAs.)|
|North Dakota||N.D. Cent. Code §28-22-03.1(7)||Yes||Yes||The account must have been opened for a period of at least one year. Each individual account is exempt to a limit of up to $100,000 per account, with an aggregate limitation of $200,000 for all accounts. The dollar limit does not apply to the degree to which the debtor can prove the property is reasonably necessary to support the debtor, spouse, or dependents.|
|Ohio*||Ohio Rev. Code §2329.66(A)(10)||Yes||Yes||Neither SEPs nor SIMPLE IRAs are not exempt. There is a specific exemption for inherited IRAs. (Provides for exemption of inherited IRAs.)|
|Oklahoma||Okla. Stat. tit. 31, §1(A)(20)||Yes||Yes|
|Oregon||Or. Rev. Stat. §18.358||Yes||Yes|
|Pennsylvania||42 Pa. Cons. Stat. §8124(b)(1 )(ix)||Yes||Yes||The Pennsylvania state IRA creditor protection exemption does not apply to amounts added to the retirement fund in excess of $15,000 or within one year prior to the debtor filing for bankruptcy. This does not include rollover IRAs.|
|Rhode Island||R.l. Gen. Laws §9-26-4(11)||Yes||Yes||The exemption doesn’t apply to a court order associated with a judgment of divorce or separate maintenance, nor to a court order concerning child support.|
|South Carolina||S.C. Code §15-41-30||Yes||Yes||There is a specific exemption for inherited IRAs. (Provides for exemption of inherited IRAs.)|
|South Dakota||S.D. Codified Laws 43-45-16;43-45-17||Yes||Yes||The code exempts “certain retirement benefits” up to $1 million. Cites Sec. 401 (a)(13). Subject to the right of the state of South Dakota and its political subdivisions to collect any amount owed to them.|
|Tennessee*||Tenn. Code §26-2-105||Yes||Yes||Not exempt from QDROs.|
|Texas||Tex. Prop. Code §42.0021||Yes||Yes||There is a specific exemption for inherited IRAs. (Provides for exemption of inherited IRAs.)|
|Utah||Utah Code §78-23-5(1 )(a)(xiv)||Yes||Yes||The IRA creditor exemption doesn’t include amounts contributed or benefits accrued by or on behalf of a debtor within one year before the debtor files for bankruptcy.|
|Vermont||Vt. Stat. tit. 12, §2740(16)||Yes||Yes||Nondeductible traditional IRA contributions as well as earnings are not exempt.|
|Virginia||Va. Code §34-34||Yes||Yes||IRAs are exempt from creditor process to the extent allowed by federal bankruptcy law. An IRA isn’t exempt from a claim from child support or from spousal support.|
|Washington||Wash. Rev. Code §6.15.020||Yes||Yes|
|West Virginia||W.Va. Code §38-10-4||Yes||No|
|Wisconsin||Wis. Stat. §815.18(3)(j)||Yes||Yes||The exemption doesn’t include to a court order concerning child support, family support, or maintenance, or any judgments of annulment, divorce, or legal separation.|
|Wyoming||Wyo. Stat. §1-20-110||Partly||Partly||Exempt to the extent payments are made to the fund while solvent.|
|* In Kentucky, Michigan, Ohio, and Tennessee, the Sixth Circuit ruled in Lampkins v. Golden, 28 Fed. Appx. 409 (6th Cir. 2002) that a Michigan statute that exempts SEPs and IRAs from claims of creditors is preempted by the Employee Retirement Income Security Act (ERISA), therefore, a SEP IRA was subject to state law garnishment. The decision seems to be restricted to SEPs and SIMPLE IRAs.|
So, are rollover IRAs protected from creditors? The answer is yes. From our research, we have found that every rollover from an employer plan into an IRA is protected. Moreover, they do not count toward the cap on how much you can protect. In addition, the SEP and SIMPLE IRA accounts also enjoy an exemption, much like employment plan IRA rollovers.
From looking at statutes and case law, a rollover IRA from a SEP or Simple IRA only gets $1 million of creditor protection. Bankruptcy code section 522(n) does not cover a rollover under section 408(d)(3).
Okay, now are inherited IRA protected from creditors? No. Not automatically. The Supreme Court ruled that IRAs that you inherit are not protected. Federal bankruptcy statutes allow their seizure. General creditors may take an IRA that you inherit.
However, states can take additional provisions to such that IRAs maintain their protected status upon inheritance. Several states have taken such measures. As of this writing, those states include the following:
There are many other types of exemptions to protect you from lawsuits besides the IRA creditor protection in each state. For example, one of these include the homestead exemption, that shields some or (rarely) all of the equity in your home. In addition, there are tenancy by the entirety states that offer some judgement protection. Then, there are the ones that expose married couples to greater risk such as the community property states. Another interesting option for the residents of one state that keeps creditors at bay is the California Secure Choice Retirement Savings Program. Moreover, states and territories offer wage garnishment exemptions that vary by region.
The above is for informational purposes with respect to IRA creditor protection by state and is not to be considered tax or legal advice. As such, the author believes it is accurate at the time of its writing but the author or associated parties make no guarantees. Further, if such advice is needed, seek the services of a qualified, licensed, practicing attorney and/or accountant.