We have a client who has an IRA that is a CD. He want's take out a loan against the IRA CD. Can that be done?

I have always heard that a bank may not take a lien on an IRA - no matter how it is structured.

I do not know where it says, if it does, but my understanding has always been the same too...you cannot attach retirement funds as collateral for a loan.

From IRS Publication 590:

"Prohibited Transactions
Generally, a prohibited transaction is any improper use of your traditional IRA account or annuity by you, your beneficiary, or any disqualified person.

Disqualified persons include your fiduciary and members of your family (spouse, ancestor, lineal descendant, and any spouse of a lineal descendant).

The following are examples of prohibited transactions with a traditional IRA.

Borrowing money from it.

Selling property to it.

Receiving unreasonable compensation for managing it.

Using it as security for a loan..."

HSA's are not eligible to be used as collateral for a loan either.

Also do not know the cite, but what with the IRS consequences and the fact that an IRA can not be attached through bankruptcy...

Ah, thanks Lestie!

Gold star for Lestie today!