Florida IRA Account Protection

Florida asset protection law was in flux for a long time with respect to inherited IRA accounts. A number of Florida courts had decided that an IRA inherited by anyone other than a spouse fell under the definition of “inheritance” rather than “retirement savings.” The difference between those classifications is crucial. Inheritance is not protected from creditors as an exempt asset class. Retirement accounts, on the other hand, are completely protected exempt assets that cannot be reached by creditors.  From the standpoint of Florida asset protection for IRA accounts, what we wanted was for inherited IRA accounts to be exempt as retirement savings.

Legislature Changes Florida Asset Protection Law

The Florida legislature is on a roll when it comes to asset protection legislation! Not only did the legislature address the issue of single member LLCs when it enacted a new law that partially approves the decision in Olmstead while creating absolute charging order protection for other types of limited liability companies, but they have now also addressed the issue of Florida inherited IRA accounts described above.

Florida Statutes section 222.21 has been amended and now specifically defines inherited IRA accounts as exempt property. The effect of this is very significant, especially since the new law is retroactive. Even if an IRA was inherited prior to the this new law becoming effective, the retirement account is now protected as exempt property. We love retroactive Florida asset protection legislation (even though it creates a million other questions, like what happens if someone has already lost their inherited IRA in a lawsuit?).

Here’s an example of how this new Florida asset protection law in action. If Miss Piggy is a judgment debtor – if she owes lots of money to creditors – and inherits an IRA, the creditors will not be able to reach the assets held inside that IRA. They are exempt and completely off limits to satisfy debts.

Consider Moving Your IRA to Get Florida Asset Protection

The new asset protection law applies to all IRAs inherited by residents of the State of Florida, regardless of where the deceased owner of the IRA lived. If you live in Florida and inherit an IRA, it would be wise to move the inherited account to Florida so that you get the absolute benefit of the new asset protection law. States address this issue in drastically different ways, so it’s important that you take full advantage of the opportunities open to you under Florida asset protection statutes.

Taken together with the new law that addresses the Olmstead decision, it appears that Florida is becoming an asset protection friendly state.  There’s a long way to go. I still consider any asset protection plan complete unless it involves an international asset protection trust, otherwise known as a portable offshore trust, that can be triggered to safely remove assets from the reach of U.S. courts.