Your Self-Directed IRA: Asset & Creditor Protection

Your retirement account is probably one of the most valuable assets you own, as it is for tens of millions of other Americans. But what will happen if someone sues you? Will you be protected or will you find yourself being circled by the sharks? You may know these sharks by the technical name for their species: creditors.

Protecting Your Retirement Assets

In general, the asset and creditor protection strategies available to you depend on a few things, such as:

  • The type of retirement account you have.
  • What state you live in.
  • Whether the assets are yours or have been inherited.

Using a Self-Directed IRA LLC will offer you the ability to make a wide range of investments, such as real estate, in addition to offering you strong asset and creditor protection.
By using an LLC owned by your IRA, you will also gain another layer of limited liability protection. Using a Self-Directed IRA LLC to make investments offers you far greater asset and creditor protection versus making the investment personally.
For this reason, growing and investing your retirement funds through a Self-Directed IRA LLC is a great tool to protect your retirement assets from creditors, inside or outside of bankruptcy.

Federal Bankruptcy Protection for Your IRA

Traditional and Roth IRAs created and funded by a debtor are subject to an exemption limitation of $1 million. Which means that nobody can ever touch that $1 million except with your consent and creditors can't take it. That's hard to beat!

Protection From Other Creditors

Your protections extend beyond the bankruptcy setting. In general, ERISA pension plans, such as 401k qualified plans, are afforded extensive anti-alienation credi­tor protection both inside and outside of bankrupt­cy.

However, these extensive anti-alienation protections do not extend to an IRA, including a Self-Directed IRA. Since an individually estab­lished and funded Traditional or Roth IRA is not an ERISA pension plan, IRAs are not preempted un­der ERISA.

Which means for anything short of bankruptcy, state law determines whether IRAs (including Roth IRAs) are shielded from creditors’ claims.

Note: Inherited IRAs do not enjoy the protections of "normal" IRAs in bankruptcy proceedings.

Royal Legal Solutions Helps You Protect Your Assets From Creditors

Before you wade into shark-infested waters, get yourself a life vest. If you're interested in learning more about how you can better protect your assets using a Self-Directed IRA LLC, call Royal Legal Solutions today at (512) 757–3994 to schedule your retirement plan consultation.

Last Updated: 
October 27, 2017

Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.

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