TRAIL OF ASSET PROTECTION
While qualified retirement plans offer asset protection, Individual Retirement Accounts (IRA) may not. IRAs are ruled under a different Internal Revenue Code section than qualified plans, so the asset protection features are not guaranteed in all cases.
There have been cases where the courts ruled that the prohibition against the assignment of benefits does not preclude collection of taxes by the IRS for payment on a tax lien. On the other hand in the event that a participant has a garnishment of wages imposed, plan accounts do offer asset protection from those garnishments.
In the event of a divorce or child support order, qualified plan assets may be required to be distributed to provide benefits to the former spouse or the children under a Qualified Domestic Relations Order (QDRO), or a Qualified Medical Child Support Order (QMCSO). A QDRO or QMCSO must be written according to specific guidelines, and approved by the court before the distribution can be processed.
In summary, the asset protection features of an ERISA qualified retirement plan are a critical first-step for anyone looking to shield himself or herself from creditors. Once you’ve built up your retirement account, and still need additional protection, then you might look to an asset protection trust or other planning tool. These options are certainly available to anyone as a perfectly legal solution, and saves on airfare visiting your money in an offshore account.
Click here if you would like to learn more about establishing an ERISA qualified plan for your company so that you can start your asset protection strategy today.