March 15, 2017

Without any advanced planning, your retirement assets do give you some protection against creditors, but it’s not comprehensive. If you want to increase your overall asset protection, you need to consult with an attorney to figure out how to boost the protection of the personal assets you have worked so hard to build.

A qualified retirement plan may be shielded from most creditors; however, it is not complete protection. A retirement plan provides you with the benefit of having a nest egg to save money for your future and most people are also aware that there is an additional benefit of qualified retirement plans that enables you to save money on taxes. However, many people don’t realize that retirement plans can also be used to, in some form or fashion, protect your assets from creditors. 

An asset protection strategy is important for all individuals and particularly small business owners. The exemption for retirement plan assets is unlimited under Federal Bankruptcy Law. This means that a small business owner may be able to protect a large deal of wealth inside a retirement plan.

Retirement funds are protected in an asset protection plan in a variety of ways, depending on whether or not the plan is qualified and subject to the Federal Employee Retirement Income Security Act. 401(k) assets, for example, are protected ERISA, but your IRA assets may not be protected appropriately unless you use a standalone retirement trust that is put together by an experienced asset protection and planning attorney.