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This Web site contains a compilation of more than a thousand consumer finance  columns written by Tony Novak from the 1980s through 2006, updated and reformatted for maximum usefulness today.  New material was added after 2010.

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Creditor protection for Keogh

originally posted: 11/22/2006  reposted: 2/18/2011 This post has not been recently reviewed or revised by the author and may be out of date. If you notice an error or are in doubt, please send a new question by email or ask for an update. Email

Q: I know you are not a lawyer but in general are Keogh and 412i plans promoted as having some liability asset protection? Can you tell me generally about liability judgment issues with Keogh plans and 412i? specifically I want to know if: Is the assets of Keogh and 412i sheltered from a personal liability judgment such as an automobile accident over my auto policy limits and home owner's liability umbrella? Is the assets of Keogh and 412i sheltered from a business liability judgment such as malpractice?

A: The trend over the past decade has been toward treating all retirement plan assets under the same set of standards, particularly with regard to treatment in protection from creditors. Last year's new federal bankruptcy law and pension protection act helped remove some of the last remaining differences. As you note, I do not know CA law, but significant differences are unlikely. The most likely possible exception of funding decisions and transactions made to avoid creditors. As a practical matter that would mean post-liability transactions that were challenged by creditors. For example, a business owned loses a lawsuit in December 2006 and then in January 2007 starts a new pension plan and then contributes 100% of her 2006 earnings to the pension plan. This example situation would likely be easily found to be a means of avoiding creditors and therefore the asset would not be protected. Of course, for real life situations that invariably fall in the gray area, you will want to consult a lawyer.


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