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Utilizing Retirement Plans for Asset Protection - Part II

Anti-Alienation Clause

ERISA-compliant plans contain an anti-alienation clause that prohibits the creditors of the participant as well as that of the sponsoring organization from attaching the assets in the retirement plan. However, there are two main exceptions to the anti-alienation provision.

One such exception to the anti-alienation provision is child, family and spousal support obligations. In a divorce action, one spouse may claim a portion of the other spouse's retirement assets to satisfy spousal or child support obligations. In such a case, the state court may issue an order such as the qualified domestic relations order (QDRO) that transfers some of the benefits of the individual participant's plan assets to the other spouse.

Another exception to the anti-alienation clause is the federal tax lien. The federal government can obtain a tax lien on the retirement assets of a tax payer who has an outstanding obligation to the IRS. Such lien gives the federal government security interest on the payer's retirement assets. However, qualified retirement plans are protected from state tax liens.

More on this topic on subsequent blogs…

Meanwhile, if you want to know more about asset protection and how to incorporate it into your estate litigation, please don't hesitate to contact us. We would be happy to answer your questions.

*This blog entry was not written by an Attorney and should not be construed as professional legal advice.

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