August 2, 2013   Retirement Planning

Protect Your Pension Plan & Retirement Account from Creditors


protect your pension plan Retirement accounts certainly rank within a person’s most valuable assets. This is why it is extraordinarily important to protect your retirement accounts from creditors such as former spouses, as well as those who have won judgments against you. When considering how to protect your pension plan, start by determining what protection strategies are available to you based on factors including the types of accounts you have and the laws of your state.
 
Luckily, the Employee Retirement Income Security Act (“ERISA”) protects most employer-sponsored retirement plans, such as 401(k) accounts, pension and profit-sharing plans, group health and life insurance plans, dental and vision plans, HRAs, HSAs, and accidental death or disability benefits. With a few exceptions, including former spouses and the IRS, ERISA will protect a person’s 401(k) against most creditors.
 
Individual Retirement Accounts (“IRAs”), however, are not protected by ERISA. The exception to this rule is in the case of a person who has filed for bankruptcy. In that instance, federal law will protect up to $1 million. The caveat is that the money must be in an IRA that you contributed to directly. Additionally, federal law protects the entire balance of an IRA if you rolled the assets within it over from a company plan.
 
If you have assets in a pension plan that requires protection from creditors, consider placing the entire plan into a trust account. The process of this is simple, a person need only create a trust, then name the newly created trust as the beneficiary on the account. 


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