Whether your individual retirement account (IRA) can be taken in a lawsuit depends largely on your state of residꩵence and the judgment in question. There ar♒e no federal protections in place shielding your IRA from seizure in a lawsuit.

When Is Your IRA in Danger?

If you are served witܫh a lawsuit, your IRA retire🌼ment savings may be in danger. If someone falls and is injured on your property or you are involve𝔍d in a car accident, you may find yourself on the losing end of a court order. In some cases, you might be legally required to dip into your retirement savings to satisfy the debt if you areღ unable to pay using other assets.

Other issues that𓆏 may result in lawsuits that endangꩲer your IRA include credit card or loan default, divorce, and parental rights disputes.

Federal Exemptions, or Lack Thereof

Unlike 401(k) retirement plans and other savings schemes covered under the Employee Retirement Income Security Act of 1974, indivi🌟dually held IRAs are not offered blanket protection from creditors under federal law. In fact, the only guaranteed federal protection provided for your IRA is a partial exemption in the case of bankruptcy.

If you declare bankruptcy, a substantial amount of IRA assets are protected under the Bankrupt🦩cy Abuse Prevention and Consumer Prote🐟ction Act of 2005. In Feb. 2022, the protected amount, which is adjusted every three years for inflation, was recalculated at $1,512,350.

Aside from this protection, the federal government does not shelter IRA funds from confiscation. In the case of federal debts, such as unpaid taxes due to the IRS, your IRA can be seized or garnished to satisfy the debt, just as with any other asset. All other potential exemptions are at the discreಞtion of state governments, so specific laws can vary widely🔴.

State Exemptions

. Many provide IRAs with blanket protection from creditors, regardless of the debt. However, some only provide protection for IRA funds deemed to be necessary to support you and your famꦯily.

Also, many states impose a limit on the amount of IRA funds that can qualify for this exemption. Others provide full protection for IRA funds deposited a certain number of days before the judgment. In Hawaii, any funds you contribute at least three years before a judgment against you are protected from seizure. In Utah, all contributions made at least one year prior are protected.

Never a Straight Answer

Even within a single state’s code, the specific exemptions for traditional IRAs may differ from those for Roth ꦆaccounts. Funds that remain in your IRA untouched may be afforded greater protection than funds taken as a distribution.

The botto💙m line is this: If you are in danger of being sued, review the specific laws applicable to your state and account type to avoid 😼forfeiture of your retirement savings.

Domestic Relations Lawsuits

Even in states with generous exemption systems, IRA protections are lifted in cases of judgments relating to child support, alimony, or other domestic relations. If you are served with a lawsuit because of unpaid child support, for example, it is unli🅺kely your IRA is protected, regardless of where you live.