Legal Question in Tax Law in New Jersey

Bankruptcy - IRA exempt ion - Qualified Plans

Situation: Client is a Dr. who is leaving pract ice and is in a 401k plan. He is concerned abou rolling over the money int o an IRA, because IRA is no an exempt asset if he is ever sued.

Idea: Dr. can form a family LLC and form is own qualified plan. He can roll over 401k into the new plan. Does his work? Is new plan an exempt asset if he does his?


Asked on 2/22/98, 5:21 pm

1 Answer from Attorneys
WILLIAM BRANDWEIN WILLIAM A. BRANDWEIN, A PROFESSIONAL LAW CORP.

exempt from bankruptcy

As a general rule the Supreme Court has held that plan accounts subject to ERISA are exempt from bankruptcy, IRA's are not under ERISA and not protected. What you propose may work but watch out for the preferential transfer rules which make a transfer voidable at the election of the bankruptcy trustee.

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Answered on 2/26/98, 11:59 pm


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