March 01, 2021
Individual Retirement Account Explained | Are IRA’s Protected From Lawsuits?
Are IRA’s protected from Lawsuits? Learn about Individual Retirement Account and Lawsuits in this episode of Daily Wisdom!
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Episode Transcript
IRA
IRAs are protected, and 401(k)s are protected up to a million dollars in a lawsuit, potentially. Now, you still have to go through bankruptcy to get that protection. The interesting thing is that IRAs are not protected from long-term care costs. So while IRAs are protected if you were to get sued, IRAs, if you go into a nursing home, are not protected from long-term care costs. So that’s why we have a lot of clients who are taking their IRA money, paying a tax, and maybe moving it into the trust A, because it makes sense from a tax perspective, B because they’re concerned about long-term care costs.
Pulling Money Out Sooner
So to answer this question specifically, are IRAs protected from lawsuits. Yes, but not long-term care costs. Also, again, this is just an aside. But with those IRAs with taxes going up in the future thanks to the tax cuts and JOBS Act, thanks to the CARES Act that just added another $2.2 trillion to the deficit. Plus, we’re going to have round two of the CARES Act with more stimulus money coming out, which is going to raise the deficit even further, what a lot of people are doing are looking at pulling money out of the IRA sooner, rather than later to pay the taxes.