Creditor Protection for Qualified Planned Dollars Rolled Into An IRA, along with Contributions
Client has less than $1 million in a qualified plan
We plan to roll over to an IRA.
WIth change in employment, client will be eligible to contribute to the IRA.
There is a need for potential creditor protection.
Dollars rolled over to the IRA from the plan received creditor protection?
Dollars contributed as long as those dollars do not exceed the ceiling of $1,300,000 + ?
Even being co-mingled?
Correct?
Permalink Submitted by Alan - IRA critic on Mon, 2019-04-01 23:10
IRA Creditor protection depends on state statutes. Many states provide full creditor protection, some states partial. For CA, which otherwise offers very marginal creditor protection, a rollover IRA not commingled MAY be provided an unlimited dollar amount of protection but subject to bankruptcy filing. However, leaving the balance in a qualfied plan will afford ERISA protection in most cases. What state of residence is this?
Permalink Submitted by Brian Devers on Tue, 2019-04-02 01:31
I’m sorry, meant to inform that we’re in the state of Virginia
Permalink Submitted by Alan - IRA critic on Tue, 2019-04-02 02:52
Looking at two different asset protection sites, they do not agree regarding the creditor limit. One site indicates it is the same as the federal bankruptcy Act, meaning unlimited for rollover IRA accounts. In that case the rollover should be done into a new IRA account holding the rollover only. New IRA contributions later on should be made to a different IRA account. The other site indicates protection equal to the amount that would produce a 25k annual distribution for client’s life expectancy. To get a clear idea, best to check with an estate attorney in VA.
Permalink Submitted by Maria Difalco on Tue, 2019-07-23 04:33
Trend seems to be to name trust as beneficiary rather than actual persons, as has been stressed so much. Are you aware of any changes that would cause this shift?
Permalink Submitted by Bruce Steiner on Tue, 2019-07-23 15:05
More people are becoming aware of the benefits of providing for children in trust rather than outright. It keeps their inheritance out of their estates for estate tax purposes, and protects against their creditors and spouses.