However, fewer states offer such protection to Roth IRAs. In Washington, both traditional and Roth IRAs, as well as Self-Directed Gold IRAs, are fully protected from creditors. The safest states to live in to protect IRA funds, including Self-Directed Gold IRAs, are Arizona, Texas and Washington. Arizona state laws only allow a judicial creditor to request retirement funds during bankruptcy starting with the last 120 days of contributions, which means that all of the above, including Self-Directed Gold IRAs, have 100% legal protection. The federal government has laws to protect many retirement accounts, including 401 (k) and employer-sponsored plans, as well as Self-Directed Gold IRAs. 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 with strict protection of these accounts, including Self-Directed Gold IRAs.
In Arizona, only IRA contributions made within 120 days of the lawsuit are exposed to risk to the claimant. When it comes to IRAs, states have greater jurisdiction to decide what is at stake in the event of a lawsuit. The best way to deal with the possibility of a negative situation is to protect yourself from potential difficulties beforehand. The Supreme Court added federal protection to traditional IRAs and Roth IRAs in a “reasonably necessary measure.” The following table will provide a summary of the state protection that IRAs, including self-directed IRAs, receive from creditors outside the context of bankruptcy.
Therefore, since an individually established and funded traditional or Roth IRA is not an ERISA pension plan, IRAs do not have priority under ERISA. It's important to note that some states have limited or no laws that protect IRA savings in the event of lawsuits. For example, if you use a self-directed IRA LLC to make investments, you'll have better asset and creditor protection than if you made the investment yourself. Therefore, for anything other than bankruptcy, state law determines whether IRAs (including Roth IRAs) will receive protection against creditor claims.
For example, simple IRAs allow employees and business owners to contribute to the same retirement fund account. That's why it's important to protect your IRA funds from creditors, including people who have won lawsuits against you.