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W-9, W-8BEN and W-8 BENE: IRS issues new forms and new rules;
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ACH Security Framework Rule - Small Rule, Big Implications;
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August 6
Part I
Flood Insurance: Requirements and Best Practices
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A to Z of Reg E;
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August 13
Part II
Flood Insurance: Requirements and Best Practices
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David Dickinson and Jerod Moyer



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#5762 - 10/19/01 04:51 PM Garnishment on an IRA
Jan94 Offline
Platinum Poster

Registered: 03/05/01
Posts: 748
Loc: USA
Is it possible to garnish an IRA account? The bank received a judgment on a customer and at first it was thought the account was a CD, but determined it was actually an IRA. Thank you.

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#5763 - 10/19/01 05:45 PM Re: Garnishment on an IRA
Ken_Pegasus Offline
10K Club

Registered: 08/30/01
Posts: 17115
Loc: Another trip around the sun
Federal law does not protect IRAs from garnishment or levy. (The IRS normally does not levy on them, but that is a policy, not a legal decision on their part.)

However, exemptions under state law are common. Only a review of the law in your state could yield a reliable answer.

As a policy issue, if you determine IRA's are exempt from garnishment in your state, ask your attorney about returning the garnishment with a notation that you have the account, but believe it to be exempt. Returning the garnishment "no assets found" is a completely different message. For example, in my home state, the IRA exemption from garnishment does not apply to recent contributions.

Let the parties to the dispute sort out the details.

_________________________
The world is not a wish granting factory. Hazel Grace Lancaster

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#5764 - 10/19/01 08:57 PM Re: Garnishment on an IRA
Andy Z Online

10K Club

Registered: 10/27/00
Posts: 25191
Loc: On the Net
And this issue may be discussed more as more states adopt Financial Institution Data Match (FIDM) as Texas has.

------------------
Andy Zavoina
Opinions stated are not necessarily that of my employer.

_________________________
AndyZ CRCM
My opinions are not necessarily my employers.
R+R-R=R+R
Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

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#5765 - 10/22/01 09:30 AM Re: Garnishment on an IRA
Anonymous
Unregistered


Angela: Ken/Pegasus and Andy Z each make important points that I want to expand upon.

Definitely look at state law; it will tell you whether an IRA (or any other form of retirement acct) can be held exempt from execution to pay a state court judgment.

You will also, however, need to look at activity in the acct.

Many states have provisions that exempt an IRA, but do not exempt excess contributions. If your customer made excess constributions [deposited more $ into the acct than can be tax deferred each year], although the acct may be exempt, the entire balance may not.

Because you have potentially 2 issues to be concerned with (is the acct exempt? if so, is all the $ in the acct exempt?), the best course of action may be to freeze the acct and report to the Court that the acct may be subject to an exemption. In that way, you can let the Court decide whether all or a portion of the acct is exempt. If your customer complains, his/her proper redress is to go to Court and convince the Court that the exemption applies. I think this is one for your lawyers.

I AM NOT ENGAGED IN PROVIDING LEGAL ADVICE AND THE VIEWS EXPRESSED ARE NOT THOSE OF MY EMPLOYER


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