Many people don't realize that they can protect retirement accounts from creditors, but they can. Learn more in the following article.
June 24, 2012 /24-7PressRelease/ -- Even in today's economy, a retirement account can be one of a person's most valuable assets. Whether you are close to retirement, or in the midst of your prime earning years, the money you have accumulated should be protected. However, the specter of financial ruin can make people do desperate things. They may resort to funds in their retirement accounts in order to fend off creditors or to make it through difficult times. Unfortunately, financial troubles may persist, leaving people with little (if any) funds left for retirement.
Dipping into retirement funds is a common, yet problematic, response to financial issues, but most consumers do not realize that such money can be protected from creditors under state law, federal law and the U.S. Bankruptcy Code.
Under New York law, money set aside in an individual retirement account (IRA) is exempt from creditors, except in limited circumstances. Similarly, all funds included in employer-sponsored retirement accounts (including 401ks) are protected under the Employee Retirement Income Security Act (ERISA), and are exempt from creditors in bankruptcy. Further, the bankruptcy code protects up to $1 million in funds set aside in Keogh plans and IRAs if the owner files for bankruptcy protection. This amount increases if the funds are rolled over from a qualified retirement plan.
Additionally, contributions to Coverdell Education Savings Accounts and state sponsored 529 college savings plans are protected in bankruptcy if they are made at least two years before a petition is filed.
Most people experiencing financial problems have less than $100,000 in their retirement accounts, far less than the protected limits under the bankruptcy code. As such, it is important for consumers facing financial issues to learn about their rights and options for protecting their legacy from creditors.
Article provided by Glenn & Glenn LLP
Visit us at www.glennandglenn.com
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