The safest states to live in to protect IRA funds, such as a Self-Directed Gold IRA, 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 has 100% legal protection. 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 Self-Directed Gold IRA from seizure in a lawsuit. 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.
This is for informational purposes with respect to the state's protection of creditors from an IRA and should not be considered tax or legal advice. Even within the single-state code, specific exemptions for traditional IRAs may differ from those for Roth accounts. The only federal protection for IRA funds in a legal proceeding is a partial exemption in bankruptcy cases. Others offer full protection to IRA funds deposited before a certain number of days before the judgment.
Even in states with generous exemption systems, IRA protections are lifted in cases of judgments related to child support, alimony, or other domestic relations. In fact, the only guaranteed federal protection for your IRA is a partial bankruptcy exemption. In Hawaii, any fund you provide at least three years before a judgment is handed down against you is protected from seizure. However, some only protect IRA funds that are considered necessary to support you and your family.
Funds that remain intact in your IRA may receive greater protection than funds taken as distribution. Whether you have a traditional IRA, a Roth IRA, or both, you should keep in mind that creditor protection from an IRA varies by state. If you are sued for not paying child support, for example, your IRA is unlikely to be protected, regardless of where you live. In the case of federal debts, such as unpaid taxes due to the IRS, your IRA can be garnished or garnished to pay it off, just like any other asset.
There are many other types of exemptions to protect you from lawsuits, in addition to the protection of IRA creditors in each state.