Individual Retirement Accounts (IRAs) are a critical asset for individuals planning for their financial future. But what happens when a lawsuit or creditor comes after your assets? Fortunately, Florida provides strong protections for IRAs against lawsuits and creditor claims, making it one of the most asset-protective states in the U.S.
In this article, we will explore whether IRAs are protected from lawsuits in Florida, discuss exceptions and limitations, and answer frequently asked questions (FAQs).
Are IRAs Protected from Lawsuits in Florida?
Yes. Florida law provides significant protection for IRAs from creditors and legal judgments.
Under Florida Statute § 222.21, both traditional IRAs and Roth IRAs are exempt from creditors in most situations, meaning they cannot be seized in a lawsuit. This exemption covers both state court and federal bankruptcy court proceedings, making Florida one of the most IRA-protective states in the country.
Why Are IRAs Protected in Florida?
The Florida Legislature and U.S. Supreme Court recognize retirement accounts as essential assets for financial security. Florida’s strong public policy ensures that individuals can preserve retirement savings even if they face financial difficulties.
The law protects IRAs because:
- They provide for an individual’s retirement security.
- The government encourages retirement savings through tax-advantaged accounts.
- Creditors should not be able to strip individuals of their future financial stability.
Florida’s IRA protection law is broader than federal exemptions and more protective than many other states.
What Types of IRAs Are Protected from Lawsuits in Florida?
The IRA exemption in Florida covers most types of retirement accounts, including:
✅ Traditional IRAs (Tax-Deferred Retirement Accounts)
✅ Roth IRAs (Post-Tax Retirement Accounts)
✅ SEP IRAs (Simplified Employee Pension Plans)
✅ SIMPLE IRAs (Savings Incentive Match Plan for Employees)
In contrast, non-retirement investment accounts (brokerage accounts, stocks, and mutual funds) are not protected under Florida’s IRA exemption laws.
Are IRAs Protected in Bankruptcy Proceedings?
Yes, IRAs are protected in bankruptcy proceedings under Florida law and federal law.
- Under Florida Statute § 222.21, IRAs are fully exempt from state court creditor claims.
- Under federal bankruptcy law (11 U.S.C. § 522(n)), IRAs are protected up to $1,512,350 per person (as of 2024).
- Florida opts out of federal exemptions, but the state provides unlimited IRA protection against bankruptcy.
Exception: If you move to Florida from another state less than 730 days before filing for bankruptcy, your previous state’s laws may apply instead of Florida’s.
Are Inherited IRAs Protected from Lawsuits in Florida?
⚠ No. Inherited IRAs are NOT protected from lawsuits in Florida.
In Clark v. Rameker (2014), the U.S. Supreme Court ruled that inherited IRAs are not exempt from creditor claims in bankruptcy cases. This ruling applies to federal law, but Florida law does not provide any additional protection for inherited IRAs.
If you inherit an IRA, creditors can seize it in a lawsuit or bankruptcy.
How to Protect an Inherited IRA:
- Use a trust (such as an IRA Trust) to shield inherited IRAs from creditors.
- Name a trust (instead of an individual) as the IRA beneficiary.
- Consult an estate planning attorney for legal strategies to protect inherited IRAs.
When Can a Lawsuit or Creditor Seize an IRA in Florida?
While IRAs are generally protected, there are exceptions where a lawsuit or creditor may claim part of an IRA:
A. Federal Tax Liens
- The IRS can seize IRA funds if a person owes unpaid federal taxes.
- Florida’s IRA protection does not apply to IRS tax liens.
B. Child Support & Alimony Obligations
- Florida courts can garnish IRAs for child support or alimony payments.
- The Florida Constitution prioritizes family support obligations over creditor protection.
C. Fraudulent Transfers (Fraudulent Conveyance)
- If a person transfers assets into an IRA to hide money from creditors, courts may allow creditors to recover those funds.
- Florida law prohibits fraudulent transfers, even if they involve IRA contributions.
D. Criminal Restitution Orders
- If someone is ordered to pay restitution for a crime, their IRA funds may be subject to seizure.
Can a Florida Court Garnish IRA Withdrawals?
While an IRA itself is protected, once you withdraw money, those funds lose their protection in some situations.
For example:
- If you withdraw $50,000 from your IRA and deposit it in a regular bank account, creditors can seize the funds.
- Required Minimum Distributions (RMDs), if withdrawn and not reinvested, may be subject to garnishment.
- To maintain protection, IRA withdrawals should be directly used for necessary living expenses.
Frequently Asked Questions (FAQs)
Q1: Can creditors seize my IRA in a lawsuit in Florida?
✅ No, IRAs are protected under Florida Statute § 222.21, except in cases of tax debts, child support, criminal restitution, or fraudulent transfers.
Q2: Is my IRA protected if I file for bankruptcy in Florida?
✅ Yes, Florida provides full protection for IRAs in bankruptcy cases. However, federal law limits IRA protection to $1,512,350, unless Florida law applies.
Q3: Are 401(k) accounts protected from lawsuits in Florida?
✅ Yes, 401(k)s, pensions, and employer-sponsored retirement plans are protected under ERISA (Employee Retirement Income Security Act) and Florida law.
Q4: Can an ex-spouse take my IRA in a divorce?
✅ Yes. Florida divorce courts can divide IRAs as part of marital property division under a Qualified Domestic Relations Order (QDRO).
Q5: What happens if I move to Florida from another state?
- If you’ve lived in Florida for more than 730 days, Florida’s IRA protection laws apply.
- If you’ve lived in Florida for less than 730 days, your former state’s laws may apply instead.
Q6: Can I put my IRA in a trust to protect it?
✅ Yes. Some people use IRA Trusts to add extra protection, especially for inherited IRAs. Consult an estate planning attorney to explore options.
Conclusion: How to Protect Your IRA in Florida
✅ Florida provides one of the strongest IRA protections in the U.S., shielding IRAs from lawsuits, creditors, and bankruptcy cases.
⚠ However, federal tax debts, child support obligations, and fraudulent transfers can override IRA protection.
🚀 If you have an inherited IRA, consider legal strategies like an IRA Trust to protect your assets.
If you are concerned about lawsuits or creditor claims against your IRA, consult a Florida asset protection attorney for personalized legal advice. Protecting your retirement savings is essential for long-term financial security!
