Creditor protection on an IRA vs. 401K
I have a client living in Florida who is 591/2 years old. He just requested an in service distribution that he was going to rollover into his IRA. He received the checks and has them in hand. The concern he just thought of was that he is in the process of requesting a loan modification on a property that he owns in Florida. Will the IRA give him any less protection that had he left it in the 402K plan. If so, can he return the checks to his 401k plan at work if he still has them in hand? Thanks you
Permalink Submitted by Alan Spross on Fri, 2011-02-25 17:19
An ERISA protected qualified plan will always have the best asset protection. However, FL protects IRAs 100% according to the following guide, and unless this has changed recently, the client can feel very safe with the IRA. Note that FL opted out of the federal BK provisions to the extent possible (see footnote on the opt out *). That said, this is a very complex subject and legal advice from a FL attorney would be helpful in weeding out any exceptions to the above generalizations.
http://www.creditorexemption.com/
Of course, neither type of plan provides protection in the case of marital settlements or IRS liens.