The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) protects all tax-deferred retirement accounts from creditors, including IRAs. However, you have to file for bankruptcy to get the protection. What’s more, BAPCPA has other provisions that make it more difficult to file for bankruptcy.
If you are unwilling or unable to file for bankruptcy, asset protection will depend upon state laws, which vary widely. In some states, asset protection for IRAs is limited to what’s “reasonably necessary” for the support of an IRA owner and dependents, which becomes a judgment call.
Suppose you are concerned about asset protection, you don’t want to go bankrupt, and your state’s laws don’t provide much protection from creditors. A new choice is to move your IRA to Alaska, which just passed a law that will allow nonresidents to form an Alaska IRA.
The IRA custodian must be a bank or trust company based in Alaska. Alaska law protects IRAs so these accounts would enjoy that shelter. However, this law is new so its power to shield nonresidents is not certain.
