Asset Protection And Retirement Accounts

Divorce is detrimental in a number of emotional and financial ways and court cases continue to add to the list. The key question in a recent case was whether a person’s interest in his ex-spouse’s retirement accounts (e.g., through Qualified Domestic Relations Orders or QDROs) are protected as “retirement funds” under the federal bankruptcy code. This court again decided they are not protected. One message is that even though ERISA plans can provide certain bankruptcy protection for “participants” of retirement plans, this is not necessarily extended to alternate payees, such as beneficiaries who inherit them or ex-spouses.

Planning Point: In some cases, trusts can be used to help add protection for the benefits.

*Intended as general guidance only and not as legal advice.