Not all retirement plans are created equal.

When people think about asset protection, they are often thinking about two very different risks:

• Creditor or lawsuit exposure in California courts (exposure to judgment creditors); and

• Exposure in bankruptcy under federal law (federal law nevertheless applies in California bankruptcy even though California has “opted out” of the list of property that federal law dictates is exempt from the bankruptcy estate).

This distinction is critical – because the manner in which your retirement accounts are treated (the level of creditor exposure) varies depending on whether you are facing a non-bankruptcy creditor (i.e., a judgment creditor who won a lawsuit against you) or a bankruptcy creditor (i.e., a lender or other person or entity to whom you owe money).

How do retirement plans fit into this picture?

The Final Regulations clarify various ambiguities, including but not limited to the following: Special rules for surviving spouses that extend the time period in which the surviving spouse can “stretch” the account.  This is one of the biggest and most advantageous takeaways from the Final Regulations. Another major “win” for families are the special rules for children of the deceased participant who, at the time of the participant-parent’s death, had not reached the age of majority.  In short, if the child was a minor (under the age of 21), there may be planning strategies available to “stretch” the IRA.

As you may or may not be aware (if you’re not, you need to be!), at the end of 2019, Congress passed the Setting Every Community Up for Retirement Enhancement (SECURE) Act.  Since then . . . Ryan works to assist his California clients understand how death, trusts, beneficiary designations, and retirement and inheritance objectives intertwine with the SECURE Act in light of the long anticipated, and now received, Final Regulations.