SEP IRAs, SIMPLE IRAs and most renewed IRAs are fully protected from creditors in the event of bankruptcy, regardless of dollar value. If funds from a 401K are transferred to a Self-Directed Gold IRA, that money is protected from lawsuits. So, are renewed IRAs protected from creditors? The answer is yes. From our research, we've discovered that any transfer from an employer plan to a Self-Directed Gold IRA is protected. Also, they don't count toward the limit of how much you can protect.
In addition, SEP and IRA SIMPLE accounts also enjoy an exemption, as do IRA account renewals for employment plans. There are many other types of exemptions to protect you from lawsuits, in addition to the protection of IRA creditors in each state. Other problems that can lead to lawsuits that jeopardize your IRA include default on a credit card or loan, divorce, and disputes over parental authority. In addition to bankruptcy, traditional contributory IRAs and Roth IRAs and legacy IRAs are only protected by state law.
Let's start with creditor protection in the event of bankruptcy, because it's the easier scenario of the two. If you transfer that money to your IRA, unlimited protection in bankruptcy proceedings will follow. In Hawaii, any fund you provide at least three years before a judgment is handed down against you is protected from seizure. If you're lucky enough to live in a state that offers strong IRA protection in non-bankruptcy situations (which, thankfully, happens in most states), you probably won't give up too much when transferring your 401 (k) to an IRA.
If you are sued for not paying child support, for example, your IRA is unlikely to be protected, regardless of where you live. In sharp contrast, standard IRAs, pensions and other non-ERISA plans are subject to state creditor law, and in Minnesota, such plans have very limited protection. Below, you'll see the various exemptions for creditors per IRA judgment by state (at the time of writing). Funds that remain intact in your IRA may receive greater protection than funds taken as distribution.
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