Protection Of 401K Retirement Proceeds

A client recently withdrew large sums of money from his 401 k plan to pay living expenses. He deposited the money in his bank account. The client wants to know if the money is protected from creditors after it has been deposited in his bank account. The Florida statutes exempt many specific assets including retirement proceed and annuities. The annuity statute specifically exempts not only the annuity but the proceeds of the annuity. The statute protecting retirement funds does not address proceeds paid from retirement funds.

I conducted initial legal research while the client was in my office. I quickly found several bankruptcy cases which held that retirement proceeds are exempt. The courts reasoned that although proceeds are not mentioned in the statute the legislature intended to protect retirement money and that protection extended to proceeds deposited in financial accounts. There may be cases with opposite holdings. Florida courts interpret exemption statutes liberally for the debtor's benefit. More likely than not retirement proceeds would be protected from creditors.

posted by Jonathan Alper, asset protection and bankrutpcy lawyer, Orlando, Florida