Does Florida law protect IRAs and SEP-IRAs from Creditors?

NOTE: The US Supreme Court ruled that inherited IRAs are not protected from creditors.  Florida has statutes that appear to offer protections for residents of Florida.  It is best to plan for no creditor protection for inherited IRAs at this time.


At the Law Office of David M. Goldman, one of our biggest goals is to protect our client’s assets from creditors.  One of the most important assets a person can have is a retirement account.  These accounts are often targeted by creditors, but the good news is many retirement accounts are protected from creditors through federal and state laws.

So what type of retirement accounts are protected from creditors?  The most common form of protected retirement accounts are known as “qualified retirement plans,” and are protected under Federal ERISA law.   ERISA protected accounts include traditional pension plans such as 401(k) and 403(b) plans, and these plans are usually exempt from civil court judgments and from bankruptcy.  Other protected accounts include Rollover IRA accounts, which are assets, formerly in a 401(k) account, from a previous employer that are “rolled over” into an IRA.  This means that these retirement accounts are usually protected no matter what state they were established in.

Bankruptcy exemptions work a little different because Florida “opted out ” of the Federal exemptions, which means that Florida’s legislative limits on its residents who file bankruptcy by only allowing them to claim state law exemptions.  This good news is that the state law exemptions are very generous regarding retirement accounts.  Under Florida Statute 222.21, both IRAs and Roth IRAs are completely protected by debtors in bankruptcy and in civil judgments.

Another form of protected retirement account is called a SEP-IRA, or a “simple employee pension IRA.”  SEP-IRAs are a variation of the Individual Retirement Account used in the United States and are used by business owners to provide retirement benefits for owners and their employees. These types of accounts received protection under Federal Bankruptcy laws, but unfortunately many courts have disagreed as to whether states are allowed to exempt SEP IRAs from being included in civil court judgments. Some courts have ruled that SEP-IRAs fall under ERISA statutes and thus any state law protection is preempted by the federal law.

In the case of In Re Schlien, the 11th Circuit held that ERISA creditor protection does extend to Florida, but does not extend to states that have not “opted out” of the federal bankruptcy exemptions.  The court held Florida could protect these accounts due to a Bankruptcy code provision that allows states to define their own exemptions under 11 U.S.C. Section 522 (b) (1), Florida law could preempt federal law.  So because Florida has opted out of the scheme of Federal Bankruptcy Exemptions SEP-IRAs and other retirement accounts can be protected by Florida law are not preempted by federal law.

So does Florida protect SEP-IRAs from creditors?  Yes, SEP-IRAs are protected from civil judgments in Florida by statute 221.21.  This statute provides that any money or other assets payable to a participant or beneficiary in a qualified retirement or profit sharing plan is exempt from creditor claims.  This law was enacted due to a strong public policy favoring the protection of retirement plans so debtors do not have to turn to costly state aid when a debtor has taken away all means of support after retirement.  The statute also protects umbrella pension plans designated for teachers, county officers and employees, state officers and employees, police officers, and firefighters. A debtor’s IRAs are exempt from civil judgment creditors, and a 2011 amendment now extends this protection to IRA rollover accounts.

Remember that just because Florida protects IRAs from creditors does not mean that your IRA will be protected after you die.  The best way to protect your IRA after your death is to have a trust as the beneficiary of the IRA.  If you need help creating a trust that will protect your assets, contact us to do an Asset protection and estate planning review.

For more information on how to protect retirement accounts from creditors, contact our office today at 904-685-1200.

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