The Lawyers.com Law Forums will be shutting down on June 30, 2017. We encourage you to resolve any outstanding discussions prior to that time. If you have any questions about this change, please email info@martindale.com.

Asset Protection ERISA Qualified IRA funds (Adjuster Jack)

Previous | Next
 rated by 0 users
Latest post Sun, Jun 12 2016 12:06 PM by 826653. 14 replies.
  • Mon, May 25 2015 1:24 PM

    Asset Protection ERISA Qualified IRA funds (Adjuster Jack)

    Scenario:

    An individual self-employed person has 8 retirement funds of varying types housed at Fidelity Investments. None of the accounts was originallly housed at Fidelity, but rather 5 of 8 of the accounts were moved from a Fidelity competitors a number of years ago. Those 5 of 8 accounts were not originally at the competitors of Fidelity, but rather were started at other firms. The individual started these retirements accounts by working at various large companies over the last 40 years, in various US states. They originally varied in type from SEP, 401(k), Roth IRA, and an "IRA." However, what they are are currently is unclear (i.e., are they in the same form?). In the last 10 years, the individual has been self-employed and hasn't made contributions to these old funds. He is a full-time resident of Florida. He is being pursued by a personal creditor and desires to know if these retirement funds are protected should a judgment be ordered against him.

    He has been advised by legal counsel specializing in asset protection that all ERISA-qualified retirement funds are protected from personal creditors, whereas other non-ERISA qualified retirements plans/funds are not. If true, therefore, it begs the question, Are all these assorted retirement funds ERISA-qualified? Fidelity is not able to provide information on what the types of acccounts are, other than saying they are "Retirement Funds." Even that they will not provide anything in writing. He is encountering resistance at Fidelity to identify which individual types of accounts he has in these retirement funds. Beyond that, Fidelity service seems absolutely unwilling to answer whether the account types are ERISA-qualified, because they consider that an Asset Protection question or "Legal" question and not Finance-related or they simply don't know. 

    The asset protection lawyer seemed non-committal as to whether all plan types stated were ERISA qualified, but did state that they "seem to be" all protected. Obviously "seem to be" is not reliable information. Even if the atty is right, it's not known for sure what types of accounts these are.

    This is an incredibly frustrating situation. Fidelity cannot provicde ANY documentation on what types of accounts these are. They just have account numbers and balances.

    How can their types be confirmed? Does one have to sue Fidelity to compel their legal department to respond as to what types of account there are?

    If you see any inconsistencies in the scenario or if anything is unclear, I am really all ears so please point it out. Perhaps I am missing something very important and I would be glad if you could enlighten me.

     

  • Mon, May 25 2015 4:33 PM In reply to

    Re: Asset Protection ERISA Qualified IRA funds (Adjuster Jack)

    It matters of course what state law applies here. You did not specify a state, but your member info indicates Texas for the state. Assuming the funds are subject to Texas law on attachment, the actual Texas statute that exempts retirement plans does not make the protection of such funds contingent on whether they are protected by ERISA. Here is what Texas Property Code section 42.0021 actually says:

    Sec. 42.0021.  ADDITIONAL EXEMPTION FOR CERTAIN SAVINGS PLANS.  (a)  In addition to the exemption prescribed by Section 42.001, a person's right to the assets held in or to receive payments, whether vested or not, under any stock bonus, pension, annuity, deferred compensation, profit-sharing, or similar plan, including a retirement plan for self-employed individuals, or a simplified employee pension plan, an individual retirement account or individual retirement annuity, including an inherited individual retirement account, individual retirement annuity, Roth IRA, or inherited Roth IRA, or a health savings account, and under any annuity or similar contract purchased with assets distributed from that type of plan or account, is exempt from attachment, execution, and seizure for the satisfaction of debts to the extent the plan, contract, annuity, or account is exempt from federal income tax, or to the extent federal income tax on the person's interest is deferred until actual payment of benefits to the person under Section 223, 401(a), 403(a), 403(b), 408(a), 408A, 457(b), or 501(a), Internal Revenue Code of 1986, including a government plan or church plan described by Section 414(d) or (e), Internal Revenue Code of 1986.  For purposes of this subsection, the interest of a person in a plan, annuity, account, or contract acquired by reason of the death of another person, whether as an owner, participant, beneficiary, survivor, coannuitant, heir, or legatee, is exempt to the same extent that the interest of the person from whom the plan, annuity, account, or contract was acquired was exempt on the date of the person's death.  If this subsection is held invalid or preempted by federal law in whole or in part or in certain circumstances, the subsection remains in effect in all other respects to the maximum extent permitted by law.

    (b)  Contributions to an individual retirement account that exceed the amounts permitted under the applicable provisions of the Internal Revenue Code of 1986 and any accrued earnings on such contributions are not exempt under this section unless otherwise exempt by law.  Amounts qualifying as nontaxable rollover contributions under Section 402(a)(5), 403(a)(4), 403(b)(8), or 408(d)(3) of the Internal Revenue Code of 1986 before January 1, 1993, are treated as exempt amounts under Subsection (a).  Amounts treated as qualified rollover contributions under Section 408A, Internal Revenue Code of 1986, are treated as exempt amounts under Subsection (a).  In addition, amounts qualifying as nontaxable rollover contributions under Section 402(c), 402(e)(6), 402(f), 403(a)(4), 403(a)(5), 403(b)(8), 403(b)(10), 408(d)(3), or 408A of the Internal Revenue Code of 1986 on or after January 1, 1993, are treated as exempt amounts under Subsection (a).  Amounts qualifying as nontaxable rollover contributions under Section 223(f)(5) of the Internal Revenue Code of 1986 on or after January 1, 2004, are treated as exempt amounts under Subsection (a).

    (c)  Amounts distributed from a plan, annuity, account, or contract entitled to an exemption under Subsection (a) are not subject to seizure for a creditor's claim for 60 days after the date of distribution if the amounts qualify as a nontaxable rollover contribution under Subsection (b).

    (d)  A participant or beneficiary of a plan, annuity, account, or contract entitled to an exemption under Subsection (a), other than an individual retirement account or individual retirement annuity, is not prohibited from granting a valid and enforceable security interest in the participant's or beneficiary's right to the assets held in or to receive payments under the exempt plan, annuity, account, or contract to secure a loan to the participant or beneficiary from the exempt plan, annuity, account, or contract, and the right to the assets held in or to receive payments from the plan, annuity, account, or contract is subject to attachment, execution, and seizure for the satisfaction of the security interest or lien granted by the participant or beneficiary to secure the loan.

    (e)  If Subsection (a) is declared invalid or preempted by federal law, in whole or in part or in certain circumstances, as applied to a person who has not brought a proceeding under Title 11, United States Code, the subsection remains in effect, to the maximum extent permitted by law, as to any person who has filed that type of proceeding.

    (f)  A reference in this section to a specific provision of the Internal Revenue Code of 1986 includes a subsequent amendment of the substance of that provision.

  • Mon, May 25 2015 9:53 PM In reply to

    Re: Asset Protection ERISA Qualified IRA funds (Adjuster Jack)

    Michael Galzer:
    He is a full-time resident of Florida.

    Looks like Taxagent missed that part so here is the Florida statute. I won't reproduce it here, you can read it at the following link:

    http://www.leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=0200-0299/0222/Sections/0222.21.html

    Note 2 (b) that Florida also does not require the plan to be covered by ERISA to be exempt.

    Michael Galzer:
    The individual started these retirements accounts by working at various large companies over the last 40 years, in various US states. They originally varied in type from SEP, 401(k), Roth IRA, and an "IRA." However, what they are are currently is unclear (i.e., are they in the same form?)

    If all those accounts were originally tax deferred they likely would have been rolled over into the same or similar type of account each time the custodian was changed and the fact that they remained tax deferred would exempt them from judgment.

    Michael Galzer:
    Does one have to sue Fidelity to compel their legal department to respond as to what types of account there are?

    Likely a waste of money because you couldn't compel Fidelity to give an opinion as to what types of accounts they are if the accounts aren't labled. The best you could get would be copies of the documents that were completed when the accounts were opened and those could probably be had for the asking. Then the account holder would have to figure out what he did back then from any other records that he could piece together.

    It was up to him to name the accounts properly when he transfered them. If he didn't, that's on him as Fidelity had no obligation to name them for him nor does it have any obligation to name them now.

    This person's plight is illustrative of just how dangerous it is to fail to keep proper financial records.

    • The right of the people 
    • to keep and bear arms,
    • shall not be infringed.
  • Tue, May 26 2015 1:17 AM In reply to

    Re: Asset Protection ERISA Qualified IRA funds (Adjuster Jack)

    adjuster jack:

    Michael Galzer:
    He is a full-time resident of Florida.

    Looks like Taxagent missed that part so here is the Florida statute. 

    Right, I didn’t see that. It still matters what state's law applies, and where he lives may not be the relevant law. If the funds are located in another state, it is that other state’s law that will apply. If it is Florida, then the statute you linked would cover it. It is much like the Texas statute. It too does not define what is exempt based on ERISA and, as you point out, specifically states that the fund need not be ERISA protected to be exempt. 

  • Tue, May 26 2015 6:04 AM In reply to

    • Drew
      Consumer
    • Top 10 Contributor
    • Joined on Thu, Mar 30 2000
    • PA
    • Posts 51,431

    Re: Asset Protection ERISA Qualified IRA funds (Adjuster Jack)

    Seems to me that it's the nature of the current holding bucket that counts which may include your ability to sort out the starting status if that's a presumption as to current status. And it may be that retirement buckets are protected unless somebody can show that's an excluded bucket.  I dug into it elsewhere long ago  ...and in my state the case law seemed to stretch a point to protect retirement funds sort of a public policy issue.

    At least on the surface ones contributions to ones own self employment plan in an approved plan bucket at Fidelity or elsewhere would seem to be protected under both sets of laws posted.

    Im not suggesting it makes sense to do,a custodian to custodian transfer to a new pot in a favorable jurisdiction that is properly labeled ....Im suggesting it may make sense to review it. 

    On the flip side if I Were a creditor who learned of one having a protected asset under ones personal control I might try to get  an order for you to get it ....no clue if that is  legally sound.......but it came up when I looked long ago.



  • Tue, May 26 2015 10:31 AM In reply to

    Re: Asset Protection ERISA Qualified IRA funds (Adjuster Jack)

    Drew:
    I Were a creditor who learned of one having a protected asset under ones personal control I might try to get  an order for you to get it

    Not only does it appear legally unsound it also appears grammatically unsound.

    What's "it"?

    The account?

    What do you mean by "get" it?

    I've already "got" it, it's my account.

    And what could the order tell me to do with "it" once I "got" "it" or already have "got" "it" and it's already exempt from judgment as a tax deferred retirement account?

    My mind is boggling and I can't afford to let it boggle too often at my age. :-)

     

    • The right of the people 
    • to keep and bear arms,
    • shall not be infringed.
  • Tue, May 26 2015 12:20 PM In reply to

    • Drew
      Consumer
    • Top 10 Contributor
    • Joined on Thu, Mar 30 2000
    • PA
    • Posts 51,431

    Re: Asset Protection ERISA Qualified IRA funds (Adjuster Jack)

    OK, I,ll take the bait.

    If I put or hold. $  200,000 in an account that is for some reason beyond the jurisdiction of the relevant court , but I hold power to distribute the funds....and you adjusterjack know darn well it's out there,  then you might get a carefully worded court order that says Drew, you go out and bring it back to court and or have it paid over ....and if I seek to blow off the order, some judge might just put me in cooler to think about contempt of the court order. 

    At least that's my engineering mentality...lAnd a while back a smart aleck guy in my state moved his funds out of state out of country to frustrate his EX and the judge was not amused and parked the guy in jail for a good while for contempt ) 



  • Tue, May 26 2015 4:14 PM In reply to

    Re: Asset Protection ERISA Qualified IRA funds (Adjuster Jack)

    Now I'll take the bait.

    I understand what you are saying and, yes, a court could order that you surrender the funds on pain of contempt.

    But, if it's tax deferred retirement account which is shielded from any such court order I can't imagine a judge ordering you to surrender the funds when you give him documentary evidence that it is a tax deferred retirement account exempted by (statute number).

    Obviously, if you are attempting to hide money in a bucket that is not a tax deferred retirement account, the money would certainly be subject to levy by the court.

    And if you refused you would likely get parked in jail just like the guy who tried to shield the money from his EX, although in the case of divorce even the tax deferred accounts would be fair game for an ex spouse under the laws addressing QDROs.

     

    • The right of the people 
    • to keep and bear arms,
    • shall not be infringed.
  • Wed, May 27 2015 1:57 AM In reply to

    Re: Asset Protection ERISA Qualified IRA funds (Adjuster Jack)

    These are all very informative responses....I'm very appreciative. At least one major key seems to be his documentation of what these accounts actually were. This fellow has actually excellent record keeping skills and history in general but with these retirement funds he seems not to have anything because some file archive banker boxes from 10-40 years ago just went missing, period, dead stop. I thought most people kept financial records for 7 years maximum but he has them going back much further although they are absolutely missing with regard to the genesis of these Fidelity accounts before they were transferred into Fidelity.

    Is there anything else that can be done to evidence the nature of these retirement funds?

  • Wed, May 27 2015 4:57 AM In reply to

    • Drew
      Consumer
    • Top 10 Contributor
    • Joined on Thu, Mar 30 2000
    • PA
    • Posts 51,431

    Re: Asset Protection ERISA Qualified IRA funds (Adjuster Jack)

    Laymans guess.....at least the laws posted use a very broad definition of retirement accounts ...and if the funds currently are in tax deferred retirement accounts that alone may be inside the protected fence .  I Have no clue as to who has what burden...but A wild guess that there is an initial,presumption that retirement accounts are inside the protection fence and the creditor would need to show otherwise .

    Assuming one can get past any fraudulent conveyance issues, if one were to reposition the accounts direct custodian to custodian to say Vanguard with carefully labeled status might that help ID the pot status. ?  And to move a retirement account from custodian  X to custodian Y sure does not seem to fit the ordinary view of fraudulent conveyance .

    Apparently your friend has consulted an asset protection lawyer....he or she probable has a handle on odds of penetration of a retirement account 

    As an aside , unless your friend broadcasts to creditors that the history of the accounts might be fuzzy,, why would a sophisticated creditor bother to look at accounts presumed to be protected by law......



  • Wed, May 27 2015 5:15 AM In reply to

    • Drew
      Consumer
    • Top 10 Contributor
    • Joined on Thu, Mar 30 2000
    • PA
    • Posts 51,431

    Re: Asset Protection ERISA Qualified IRA funds (Adjuster Jack)

    Laymans guess.....at least the laws posted use a very broad definition of retirement accounts ...and if the funds currently are in tax deferred retirement accounts that alone may be inside the protected fence .  I Have no clue as to who has what burden...but A wild guess that there is an initial,presumption that retirement accounts are inside the protection fence and the creditor would need to show otherwise .

    Assuming one can get past any fraudulent conveyance issues, if one were to reposition the accounts direct custodian to custodian to say Vanguard with carefully labeled status might that help ID the pot status. ?  And to move a retirement account from custodian  X to custodian Y sure does not seem to fit the ordinary view of fraudulent conveyance .

    Apparently your friend has consulted an asset protection lawyer....he or she probable has a handle on odds of penetration of a retirement account 

    As an aside , unless your friend broadcasts to creditors that the history of the accounts might be fuzzy,, why would a sophisticated creditor bother to look at accounts presumed to be protected by law......



  • Wed, May 27 2015 9:07 AM In reply to

    Re: Asset Protection ERISA Qualified IRA funds (Adjuster Jack)

    Michael Galzer:
    Is there anything else that can be done to evidence the nature of these retirement funds?

    He may be missing records from 10-40 years ago but what about the last 10 years?

    Presumably he got monthly statements for each account or, if he opted for paperless, he could go online and download or print out the statement. The account titles on the statement should give him a clue.

    My own accounts with Ameritrade say IRA on one and Roth IRA on the other.

    Once he gets done retrieving the statements as far back as they go he might see if Fidelity can provide copies of the original paperwork that he submitted when he opened and/or transferred the accounts.

    My own copies specify IRA rolloever transfer and Roth IRA respectively.

    Once he has those he shouldn't need to go further back than just the Fidelity accounts to document that they are tax deferred.

    But there's also one more place to look. In his tax records if he kept those separately. Each time you transfer a tax deferred account from one custodian to another the ceding custodian sends you a 1099 for the amount transferred and his tax return for that year would show the amount of the distribution with a taxable amount of -0-.

     

     

    • The right of the people 
    • to keep and bear arms,
    • shall not be infringed.
  • Wed, May 27 2015 9:10 AM In reply to

    • Drew
      Consumer
    • Top 10 Contributor
    • Joined on Thu, Mar 30 2000
    • PA
    • Posts 51,431

    Re: Asset Protection ERISA Qualified IRA funds (Adjuster Jack)

    Adjuster jack....I simply don't know ....it may be clear that the account itself is protected from attachment....but in cases where the individual has individual power to go get the funds ..that may not be a bar to being ordered to go get the sum of $xx. That was a point of contention is one of the cases I read long ago ....the lower court held the public policy was to prevent access to retirement accounts by creditors...but that is most likely irrelevant weight as to current question.



  • Wed, May 27 2015 11:44 AM In reply to

    Re: Asset Protection ERISA Qualified IRA funds (Adjuster Jack)

    Drew:

    Adjuster jack....I simply don't know ....it may be clear that the account itself is protected from attachment....but in cases where the individual has individual power to go get the funds ..that may not be a bar to being ordered to go get the sum of $xx. That was a point of contention is one of the cases I read long ago ....the lower court held the public policy was to prevent access to retirement accounts by creditors...but that is most likely irrelevant weight as to current question.

    OK. Something came to me that might clarify your comment for you.

    If the judge says "Drew, you owe $10,000. Get $10,000 and bring it here by 5 PM or I put you in jail for contempt" the judge isn't telling you where to get the money from, he's just telling you to get it. If your only source of the money is your tax deferred retirement fund, that's not the same as the judge issuing an order to the custodian of the account for the release of $10,000 to so-and-so.

    The judge cannot directly levy the tax deferred retirement account for a monetary judgment against you.

    In a divorce, however, he can order the division of the account between the two spouses and sign a QDRO but he cannot directly levy the account for, say, back child support.

    That's the distinction that I think is bothering you. A person can be ordered to pay regardless of where the money comes from and he can certainly withdraw from a tax deferred account to avoid jail for contempt but the account itself cannot be levied by the court.

    • The right of the people 
    • to keep and bear arms,
    • shall not be infringed.
Page 1 of 1 (15 items) | RSS

My Community

Community Membership Search Community