Asset Protection – DB Plan vs. IRA
I’m interested in opinions having to do with asset protection for a DB plan vs. an IRA. I know that DB plans receive ERISA protection, but what does that mean exactly relative to non ERISA protection for IRAs? What asset protection exists for IRAs and what liability concerns would warrant leaving assets in a DB plan? If I am not mistaken IRAs are protected at the state level and this protection has increased in recent years? I am in CA if that makes a difference.
Thanks!
Permalink Submitted by Alan Spross on Fri, 2008-04-11 04:40
Unfortuneately, being in CA makes a huge difference since CA provides comparatively little protection for IRA accounts. Even for states that do protect IRAs, the protection does not equal ERISA protection. Since CA is an “opt out” state for federal BK protection, there is a gray area with respect to exactly which federal protections may still apply. Other than that the subjective test of a necessary support amount is the only protection available.
It should be noted that even with ERISA, there is no protection against IRS liens or marital settlements.
However, those with high exposures to personal or professional liability would be candidates to leave retirement assets under ERISA protection. The personal liability exposure can be partly covered by purchasing personal Umbrella coverage with high limits.
Asset protection site:
http://www.assetprotectionbook.com/state_resources.htm