The first day of law school, I learned that the answer to all legal questions is: It depends. This is very true with this question. I have several questions that will help determine the answer to the question.
1. Do you have a lien on the money?
If you have a lien then the secured creditor is secured up to the value of their collateral. What the heck does that mean? If the retirement account has a loan against it then the loan must be repaid or their could be tax or other issues. If the lien can be stripped then you need to discuss that with your attorney.
2. Is the account your own?
Last year, the US Supreme Court ruled on a case that changed how inherited IRA and 401Ks are not protected under the federal exemption statutes. However, they may still be protected under state law. Accounts rolled over or transferred between husbands and wives were not part of the ruling. One way that we are protecting inherited retirement accounts are with Trusts. There are many requirements to these retirement trusts and the protections are limited. Please let us know if you want more information. We are often holding classes on how retirement trusts work.
3. Is the account protected under State law?
We need to review the documents to see what, if any, state statutes apply to protect these type of account.
4. Did you put the money in over time or did you put it in all at once just before filing?
Timing is everything. Judge Koger, God rest his soul, ruled that pigs get fat and hogs get slaughtered. So the amount of money and the timing of the deposit really matters. I will give you an example.
Put on the black robe, you are the judge. If someone, who owed you money, took $1 million (not really possible) and put it into a retirement account (not a roll over, but new money). Is that fair? NO! On the other hand, how do you feel about $2,000? It is not the same at all. It just feels different.
In general, your retirement account will likely be protected. But please discuss this matter with your attorney. If you are my clients we will discuss it!