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annuity, pension, retirement allowance, disability payment, or death benefit from a private retirement plan are exempt.

Other exemption codes in California are found at: California Codes Code Of Civil Procedure Section 704.010-704.210.

  • b.

    Individual Retirement Accounts (IRAs). IRAs are not protected under the asset protection laws found in federal ERISA protections. However, some states have enacted special but restrictive protections of IRA plans protecting the funds and distributions only to the extent necessary for the support of the debtor, his/her spouse and dependents. For example, in California California Codes Code Of Civil Procedure Section 705.115 (e) states:

    • (e)

      Notwithstanding subdivisions (b) and (d), except as provided in subdivision (f), the amounts described in paragraph (3) of subdivision (a) are exempt only to the extent necessary to provide for the support of the judgment debtor when the judgment debtor retires and for the support of the spouse and dependents of the

judgment debtor, taking into account all resources that are likely to be available for the support of the judgment debtor when the judgment debtor retires. In determining the amount to be exempt under this subdivision, the court shall allow the judgment debtor such additional amount as is necessary to pay any federal and state income taxes payable as a result of the applying of an amount described in paragraph (3) of subdivision (a) to the satisfaction of the money judgment.

  • c.

    Qualified ERISA Plans. ERISA (Employee Retirement Income Security Act of

    • 1974)

      supplies very effective asset protection over pension funds. The federal law

overrides state law to the contrary and protects 401k, profit sharing and pension plans that prohibit involuntary assignment of plan benefits to any creditors. Assets may be transferred into such a plan with known creditors, lawsuits or judgments. However, ERISA will not protect such assets from the IRS or subject to court order in divorce court (Qualified Domestic Relations Order). ERISA plans protect employees not owner-only plan participants. If the plan s only participants are the owner and his family (spouse or dependents), then ERISA will not apply to protect the funds.

By Richard Rydstrom, Esq., LL.M. Taxation ©1989-2010 || rrydstrom@gmail.com All Rights Reserved © Richard Rydstrom 1989-2010 || www.RydstromLaw.Com

WARNING: LEGAL NOTICE: IRS CIRCULAR 230 DISCLOSURE NOTICE: To ensure compliance with IRS requirements, we inform you that any U.S. federal tax advice contained in this communication is not intended or written to be used, and cannot be used by any taxpayer, for the purposes of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Any legal advice expressed in this message is being delivered to you solely for your use in connection with the matters addressed herein and may not be relied upon by any other person or entity or used for any other purpose without our prior written consent.

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