Creditor Access to Retirement Assets

Protecting your retirement assets is an important extension of your retirement planning efforts. It is a special situation that should not be overlooked.

Determining whether or not retirement assets are reachable by creditors depends in large part on who the creditor may be. With the following creditors, for example, there is simply no way to prevent them from reaching the assets of a retirement plan:

• Divorcing spouses: In a divorce, a spouse may reach the other spouse's interest in retirement plan assets to satisfy an alimony, child support, or property settlement obligation.
• Internal Revenue Service: This should not be a big shock to anybody. The IRS can usually get to any assets to satisfy tax deficiencies assessed against a taxpayer.
• Retirement plan itself: A plan participant that breaches his or her fiduciary duty as a trustee of the plan or embezzles funds from the plan loses any protection for their interest in the plan.

In other cases, a creditor's access to a person's retirement plan assets depends on whether or not the assets are protected under ERISA or protected under state laws.