Ask Terry Questions Protection of Retirement Assets from lawsuits

Protection of Retirement Assets from lawsuits

By Terry Savage on October 09, 2023 | Wild Card

Hello Terry, I am just over 591/2 years old residing in Illinois. I am considering rolling over my 401K of $1.35 million into another retirement IRA because of better fees and diversity. I also have a SEP-IRA and a Roth IRA. I am familiar with some bankruptcy laws of protection, but have been getting a lot of different answers as to how my retirement assests are protected by the Federal and State governments in case of a lawsuit. Some say I am fullly protected, others say not protected, and others say only partially protected. I do not want to set up an off-shore account due to the complexities, rules, and costs. My main concern is to find out the best safety for my retirement funds that I will be using (not placing them in an irrevokable trust) as I have worked hard and for a long time growing them and want them protected in the best way possible “just in case”. Can you please expound with the correct answer(s)? Thank you.

Terry Says

First of all, if you’re still working for the company you CAN’T roll over your 40l(k) plan! So, set that issue aside.
Second of all, what are you doing that you live in such fear of a lawsuit??

(Note: If you’re getting divorced, it’s likely that your retirement accounts will come into the marital assets, and that a QDRO — qualified domestic relations order — will be issued, allowing some money to be set aside for your about to be ex-spouse.)

A bit of online research shows me this:
Illinois does not have a state-law provision for pensions or retirement savings accounts in bankruptcy. The law defaults to the federal guidelines, which exempts individual retirement accounts, or IRAs, of up to $1.095 million. This covers bankruptcy cases as well as garnishment orders that result from legal actions such as lawsuits.

This comes from Zachs, a highly regarded site:



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