Help please: Client lives in Illinois, has his money in an old 401k and wants to roll it into an IRA. He just found out that when his son got in an accident in a different state (cont'd)

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Assets rolled over from an ERISA protected account (401k) maintains unlimited asset protection. Make sure there is documentation showing it came from a 401k to the IRA

likesmart

IRAs don’t necessarily have the same creditor protection as 401k accounts. It varies by state law. And in no case does the 401k origin allow for unlimited asset protection. Client is wise to be concerned about this, at minimum checking with his state’s IRA law.

And the lawsuit sounds like a far fetched long shot

likesmart

I thought retirement accounts, life insurance CV and NQ annuities all had similar forms of creditor protection? Unless he’s rolling it over to cash out and stuff in the bank, then I don’t think that should be a hang up..

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Last I heard, an IRA may not offer the same creditor protection that the company 401K does. But then again I may not be up on the latest rules and these laws are constantly changing. If the account is big, you may want to offer to coordinate a free consultation with the client and an attorney

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It will show the client that you are being diligent and looking out for his best interest also by being there during that conversation you can make sure there is no misunderstanding. Not only that it would be good for you to learn how this works for future scenarios and maybe even get some referrals out of the lawyer!

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Respectfully, I disagree, Wells. There are bankruptcy and non-bankruptcy creditor protections. I grant you that bankruptcy protections follow the 401k money into an IRA, but that is not in question here. Conveyance of non-bankruptcy protections (lawsuits) vary by state and the client would be wise to check his state law, lest his financial advisor expose the client’s assets to lawsuit

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SFC1 you are wrong. IRAs DO have the same ERISA protection as a 401k as long as funds came from a 401k and are not commingled with other funds. Look it up

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(Car insurance is in son's name, but client owns car), the "injured" person wants to file a lawsuit against client. Client is now afraid of rolling over 401k due to creditor protection. The "injured" person didn't file a report or go to the hospital after the accident. This happened about 5 years ago. Seems like a longshot for this guy, but figured I'd ask you fellas.

Thanks, all!

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