April 21, 2005

Update on Creditor Protection for IRAs

President Signs Bankruptcy Bill

On April 20, 2005, President Bush signed the bankruptcy reform bill, known as the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, into law.

The new law expands the creditor protection afforded to IRAs that was recently granted by the Supreme Court.

Effect on Retirement Accounts

The new law revises the exemptions under Section 522(b)(3)(C). Retirement funds that are in plans that are exempted from federal income tax under Code Sections 401, 403, 408, 408A, 414, 457, and 501(a) are now exempted from the bankruptcy estate. This covers qualified retirement plans (401(k)s, etc.), 403(b)s (annuities and TIAA-CREF), IRAs, Roth IRAs, governmental plans, and tax exempt organization plans.

There is an inflation-adjusted cap of $1 million on IRAs and Roth IRAs. This cap can be increased at the discretion of the Bankruptcy Court and it does not apply to certain rollover contributions.

The new provisions will take effect in six months. They provide greater creditor protection for retirement plan assets, but only in bankruptcy. They do not apply to judgments awarded in other courts where state creditor protection laws will apply.

[ Home ] [ Newsletters ] [ Client Reports ] [ News ] [ Advisor Files ] [ Services ] [ Products ] [ Client Accounts ] [ Our Advisors ] [ Our Staff ] [ Brochures ] [ Site Links ] [ Fin. Calculators ]

Send mail to webmaster@fimadvisors.com with questions or comments about this web site.

Regulatory Disclosure Information

Securities offered through Mutual Service Corporation. Mutual Service Corporation and LPL Financial are affiliated companies and are members of FINRA/SIPC. FINRA web site is www.FINRA.org. Investment Advisory Services offered through Financial & Investment Management Advisors, Inc., an SEC Registered Investment Advisory Firm. Financial & Investment Management Advisors, Inc. is not affiliated with Mutual Service Corporation or LPL Financial.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, and Certified Financial PLANNER™, which it awards to individuals who successfully complete initial and ongoing certification requirements.