401K, IRA rollover, Bankruptcy in Ca.
Scenario: Female, age 69 receiving state (Ca) disability which expires in Feb, 2011. Employer just terminated
her. She wants to make a custodian to custodian transfer of her 401K. She shared that she is underwater/
upside down on her home. She has been advised to file for BK after the foreclosure. Will she weaken protection of the money in the 401K if she does an IRA rollover? Thank you.
Permalink Submitted by Alan Spross on Fri, 2010-10-29 22:18
Yes. ERISA plans have the broadest BK protection, and CA has one of the weakest state statutes for IRA protection. They have opted out of the federal BK rules, at least partially. Some provisions are mandatory. In CA an IRA is only protected up to the support needs of the IRA owner, and therefore the protected amount is subject to the judgement of the courts.
For a more specific analysis, I suggest contacting appropriate CA legal counsel.