Unless you take steps to protect them, most assets are not protected in a lawsuit. One of the few exceptions to this is your IRA, 401 (k), or other employer-sponsored retirement account. Whether your Individual Retirement Account (IRA) can be used in a lawsuit depends largely on your state of residence and the judgment in question. There are no federal protections to protect your IRA from seizure in a lawsuit.
A reader asks if IRAs are exempt from civil judgments. A civil judgment was recently handed down against me. My friends have told me that our individual residence and retirement accounts are exempt and cannot be opened. Is this true? What about the distributions we get from IRAs? Are they also exempt? AT.
Yes, the party that filed the lawsuit and won the judgment cannot take away your mortgage and retirement accounts. When you receive distributions from your IRAs, the amounts you withdraw are also exempt for 60 days from the distribution date. You should be able to use the DMV Form VTR-262 (called a “Motor Vehicle Inheritance Affidavit”) to exchange the title for that of the person or persons who inherited your brother-in-law's truck. The form is available at www, txdmv, gov.
The person (or people) who acquire the title can then sell the truck and give you the money (which would be the simplest) or they can give you the truck so you can sell it. Of course, using this form means that the truck could pass it to someone who is unwilling to accept the plan to return it to them. My husband and I have a revocable trust. Our house has been transferred to the trust.
With our other investments, we can designate beneficiaries directly. As for taxes, is it better for beneficiaries to receive their distributions through the trust or directly from the investment as designated beneficiaries? AT. If you have retirement accounts, you must exclude them from the trust and designate the beneficiaries on forms provided by the institutions where the accounts are deposited. .
Usually, there's no tax advantage whatsoever with your non-retirement accounts. My wife and I have wills. We only have one daughter who will inherit all the estate. It's already in our checking and savings accounts and in our life insurance policy.
You can use a deed of death transfer or a revocable trust. An attorney can explain the pros and cons of both options. Ronald Lipman, of the Houston law firm Lipman %26 Associates, is certified by the Texas Board of Legal Specialization in estate planning and probate law. The information in your column is intended to provide a general understanding of the law, not as legal advice.
Readers with legal problems, including those whose questions are addressed here, should consult attorneys for advice regarding their particular circumstances. While executives enjoy short-term profits — many of them driven by Russia's war against Ukraine — the oil industry faces the same long-term challenges that have threatened its future in recent years. If you plan to retire or have a lot of assets in retirement accounts and IRAs, you may want to consider moving to a state that strongly protects these accounts. Others offer full protection to IRA funds deposited before a certain number of days before the judgment.
Other issues that may result in lawsuits that jeopardize your IRA include default on a credit card or loan, divorce, and disputes over parental authority. Supplemental insurance policies and professional negligence insurance are two great ways to protect your IRA accounts. In fact, the only guaranteed federal protection for your IRA is a partial bankruptcy exemption. Moran Knobel, a certified retirement plan management and consulting firm, provides a comprehensive state-by-state list of laws that protect IRAs and provides an analysis of individual retirement accounts as exempt property.
Unlike 401 (k) retirement plans and other savings plans covered by the Employee Retirement Income Security Act of 1974, individually held IRAs do not receive general protection from creditors under federal law. However, some only protect IRA funds that are considered necessary to support you and your family. In the case of federal debts, such as unpaid taxes due to the IRS, your IRA can be garnished or garnished to pay off the debt, just like any other asset. Different state laws offer levels of protection ranging from minimal protection of IRA assets against lawsuits, judgments and creditors to full protection against all such claims.
If a lawsuit against you results in a huge judgment, you have a substantial IRA, and reside in a state that provides IRA assets with minimal protection for creditors, bankruptcy may be a viable option. Funds that remain intact in your IRA may receive greater protection than funds taken as distribution. For those with assets linked to retirement plans and IRAs, purchasing a supplemental insurance policy (also known as a personal framework policy or personal liability framework policy) can help avoid the possibility of a creditor drawing on their retirement accounts. In some states, courts consider a number of factors in determining whether part or all of the IRA should be exempt.