The federal government protects certain retirement plans from creditor claims. Here are some of the rules in this area:
The so-called anti-alienation provisions of the Employee Retirement Income Security Act of 1974 (ERISA) exempts from claims of creditors the assets of pension, profit sharing, money purchase and 401(k) plans.
These two actions are not protected by the anti-alienation provisions.
Because ERISA is a federal law it trumps any state fraudulent transfer law.
Protection under ERISA protects employee participants of retirement plans. It does not cover employers. An owner of a business is treated as an employer, even though they may be treated as an emplyee of the same business normally seen in closely held businesses. As a result there is no ERISA protection for sole proprietors, one man owner business, whether incorporated or not, or partnerships, unless the plans cover employees other than owners, partners and their spouses.
Retirement plans with anti-alienation provisions come within Bankruptcy Code Section 541(c)(2). This provision excludes from the debtor’s estate his beneficial interest in his or her retirement plan. As a result the retirement plan benefits are outside the reach of the bankruptcy courts.
IRAs are not given the same federal statutory protection as the retirement plans mentioned above. But there may be state law protections for IRAs. For example, Florida exempts all retirement plan and IRAs from creditor claims.
Pennsylvania’s statute provides protection to IRAs up to $15,000 per year. Contributions over $15,000 per year are not protected and are available to creditors. Note that it is very rare for an IRA to exceed this amount. Also, the Pennsylvania statutes provide that rollovers from qualified employer plans do not constitute “contributions” for purposes of the $15,000 limit. However a direct transfer from a qualified retirement plan already subject to creditor protection (such as a qualified employer plan) to an IRA retains the same protection.
In any event, you must look to your particular state law to see what type of creditor protection is granted to IRA.
Hiring Steven was quite possibly the best decision of my life! Steven took the time to hear every single one of my concerns and address them in an extremely clear, concise and thorough manner. He guided me through the notoriously complicated and stressful process of probate with the utmost of compassion and dedication. Thank you Steven!
I highly recommend Steven J. Fromm for all your estate and tax planning needs. He has the most complete and thorough knowledge of current as well as pending federal, state, and local tax codes of any professional that I have ever been involved with. His ability to totally sort out your current financial condition and relate it to a plan to minimize your tax liability and allow you to sleep at night is without equal. He is professional, timely, creative, and an advocate for your needs, whether its personal or business. You can be assured that you will be well taken care of, with cutting edge/ sound financial and tax advice by Steven J. Fromm.
I have always found Steve to be very responsive, accurate and creative in legal matters presented to him. He demonstrates a good business sense. We have collaborated on several highly technical issues over the years. I look forward to our continuing relationship.
Steven has been instrumental in helping my partner and I to create a secure and satisfying estate plan, which meets or exceeds all of our wishes and contains contingencies for everything from medical issues to wealth management and living wills. In this process, Steven has also become a friend. If you need Estate Planning, Tax Advice, a Will or a trust, etc., we highly recommend Steven Fromm, Esquire. He will listen and be sensitive to your unique situation.
Steve is an excellent attorney who has provided help for my family personally for business, tax, and other services for many years. He is extremely knowledgeable and thorough, and is extremely good at explaining legal concepts to me in clear terms understandable to a non-attorney. It is difficult to pick only three attributes above, since Steve’s work meets most if not all of the attributes above.
Steve is an excellent corporate attorney who has a deep understanding of corporate law, taxes and estate planning. He’s been extremely helpful to me in keeping my many companies and business ventures organized, focused and squeaky clean. He’s very strong in estate planning and wealth preservation as well. Finally, his follow through is air tight and utterly dependable.
Steven is a trusted adviser. We depend on him for so many things. He is patient, listens to our needs and makes excellent suggestions. He is extremely talented. We value his advice and have recommended him unhesitatingly to friends and family.
Steve Fromm is a superb lawyer and I highly recommend him! After a terrible experience with a previous lawyer concerning an estate administration, I entered his office feeling very deflated, confused and discouraged. However, I left his office feeling enthusiastic and eager to get down to business. My situation was very unique, I needed his expertise for an array of things and Steve was able to address all of my needs. With a limited timeframe and an extreme amount of obstacles to overcome he worked meticulously, diligently and accomplished extraordinary results. His professionalism is incomparable and I am forever grateful.