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Resource Library

Creditor Protection, Predator Protection, Asset Protection, Exempt Assets

Anyone can be sued, and often is, especially in the United States. Many of the suits are frivolous, but are brought anyway for harassment and because it is cheaper to settle than to litigate, and because you don't have to be right to win. It is a sad state of affairs. Perhaps it is in recognition of this salient fact of American life that most states have exempt property laws, which protect from execution certain types of property, under certain situations. In Texas, life insurance, including the cash value as well as the proceeds is theoretically exempt. So is your homestead, your IRA, and your 401(k) plan, non self-settled trusts, etc., at least in theory, and subject to exceptions. It is not unethical to maintain some assets that cannot be reached by creditors in the event of an unexpected bad turn of events. You don't want to be left on the street destitute because of a lawsuit, frivolous or not; and our legislature has provided that you don't have to lose everything even if you are the victim of a large judgment against you. It is nothing but common sense, therefore, to think about such unfortunate contingencies and to plan accordingly.


This is a very good reason to leave your beneficiaries their inheritance in trust, where it will be difficult or impossible for their creditors, including ex-spouses, to reach it, rather than leaving your estate to them outright, where it can very easily be seized in a lawsuit or divorce. There is some protection, even if the beneficiary is the trustee of his or her own trust, if the distribution provisions are subject to an ascertainable standard, like support. It is better to have an independent third-party as trustee, but that is a trade-off many people don't want to make, and it is not clearly absolutely necessary.


2011 - ABA Creditor Claims & Conflict Laws IRAs SEPs

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This was a paper submitted at a National ALI-ABA webinar. Al Golden was my co-panelist. The subject covered is not one you find much written about. I wrote it because it seemed that no one else had already done so.


There is not much literature on Simplified Employer Plans (SEPs), nor are they well understood. Generally, the employer signs a simple IRS prepared form that is about two pages long. It is not uncommon for the form to never be read by anyone. This is understandable in the case of a 150 page defined benefit plan, but not here. The way a SEP operates is that the employer makes a uniform contribution as a percentage of salary to the individual IRAs of each participant. The SEP is probably subject to ERISA. Are the IRAs subject to ERISA? If so, the anti-alienation provision of ERISA that applies to qualified plans do not apply to the SEP, for reasons explained in the article. However, what about the individual IRAs. They might be covered by a state law exemption for IRAs. If so, is the state law exemption preempted. What if the SEP is one state, the IRA owner in another, and the SEP-IRA in a third. Which law governs? These and other issues are discussed in this article.


2005 - 42.0021 Creditor Protection of IRAs In Texas

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2004 - EP QPs & IRAs - Creditor Issues

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This area of the law is very esoteric. But it is equally very important. In most, but not all, cases, your IRA and qualified retirement plan is an exempt asset under state or federal law.


2004 - Creditor Claims In Probate

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The law has changed since this article was written, but the article is nonetheless still of some use and is not entirely out of date.


2003 - Roth IRAs

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Your Roth IRA should be an exempt asset too, although this was altogether clear for a while.

2003 - Administering The Potentially Insolvent Estate

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The law has changed since this article was written, but the article is nonetheless still of some use and is not entirely out of date.


2003 - Exempt Property & Probate Allowances

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The title is self-explanatory. There are some assets that cannot be reached by creditors during life, and some that cannot be reached at death, and some that cannot be reached in either case. The rules, however, are different at death, because the law provides that the family is entitled to certain allowances, including the right to occupy the homestead, and those rights can come ahead of other creditors, and even trump expenses of administration in some cases.


2003 - 42.0021  Creditor-Protection Of IRAs In Texas

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This is a subject that continues to evolve.

Board Certified: Estate Planning & Probate Law by

the Texas Board of Legal Specialization since 1983

These materials are not meant to and may not be relied upon, but are published for discussion purposes only.  Rule 7.04(b) disclosures.

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