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Using Estate Planning to Protect Retirement Accounts from Creditors in Florida


We have previously (briefly) discussed how you can ensure that beneficiaries do not have to pay creditors out of their own pockets, however, what about ensuring that retirement accounts are protected from creditors? Degrees of protection differ significantly when it comes to IRAs and 401(k)s, and this is something that your estate planning attorney can assist you with; based on the specific circumstances of your case. It is especially important to understand what kind of protections exist from creditors when it comes to retirement accounts before you withdraw from those accounts, as these protections can help preserve these savings, as we discuss below.

Figuring Out the Best Option for You, Specifically

For example, while IRAS provide federal creditor protection in certain circumstances for a certain amount of contributions and earnings, 401(k)s may be a more secure option for you because they are entirely protected from creditors via federal law.

However, there are circumstances under which state law provides for creditor protection for IRAs under some judgments. Take a look at Florida: Florida law protects IRAs from civil judgments and provides protection for any other funds payable to beneficiaries in qualified retirement plans. Still, what you want to ensure is that you have creditor protection in the event of bankruptcy, which rolling over into an IRA here in Florida can accomplish. That being said, there are some circumstances under which your attorney and/or financial advisor may suggest that you still leave funds in a company plan instead because this provides the most creditor protection in your case.

What About My Beneficiaries?

One of the biggest benefits of IRAs is that it is an extremely simple and straightforward process to select the beneficiaries who will receive your assets once you pass. These assets are also of course kept out of probate and go directly to the beneficiary. However, estate planning is more than just filling out documents because you want to make sure that your beneficiary designations are in keeping with your overall estate planning goals, and this takes careful planning. This is because beneficiaries are not always as protected from creditors in the same way that the original account owners are; for example, based on a decision made by the US Supreme Court, non-spouse beneficiaries who receive inherited IRAs are not protected from creditor claims if they file for bankruptcy; with the rationale being that these are no longer technically “retirement funds.” Because a spouse can roll over an inherited IRA into their own account and a non-spouse beneficiary cannot, this essentially changes the nature of the asset and how it is treated with respect to creditor protection.

Contact Our Florida Estate Planning Attorneys to Find Out More

If you have any questions about estate planning here in Florida, contact our experienced Orlando estate planning attorneys at the office of Gierach and Gierach, P.A. today to set up a consultation and find out how we can help.





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