New York Estate Planning & Elder Law Blog
STATE SPECIFIC PROTECTIONS
The current aggregate value of retirement assets in America is roughly $21 trillion, with individual retirement accounts (IRAs) amounting to the largest single investment asset. While many, if not most, types of retirement assets and accounts are protected against creditors, the IRA is not necessarily one of them. The various protections for IRA are dependent on the amount, how long ago you put the money into your account and the state or jurisdiction you live in. Employer sponsored plans are covered by protections found in federal law, so it is much easier to talk about what protections exist for such plans. The Employer Retirement Income Security Act of 1974 (ERISA) created a large host of protections for employees, including protections against creditors, except when the creditor is the Internal Revenue Service (IRS) or a spouse or former spouse for debt incurred through domestic relations.
The protections found under ERISA have expanded over time through both Congressional action and judicial interpretation of the law. ERISA plans must provide periodic updates to the employees, information about the plan features, creates fiduciary responsibilities for the plan administrators as well as things such as an appeal process for certain decisions that the employee disagrees with. One large collective group of accounts that are not protected, however, are IRAs. IRAs, as the name implies, are owned by an individual and thus do not fall under the protections of ERISA. Most protections for IRAs are found in state law.