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Protect assets from creditors, lawsuits

Other exemptions
Other exemptions © olivier/

Depending on what state you live in, other assets may be legally shielded from creditors and predators.

Protection for IRAs that don't come from a retirement plan, Armstrong says, varies from state to state. In some they are fully exempt, in others only partially so. "In those states where they are not fully protected," he says, "if you have the opportunity to move to a qualified (retirement) plan, that would be the thing to do." A federally protected qualified plan trumps partial protection afforded to an IRA.

Wages may be exempt from attachment to a certain extent. "You have to have enough to live on," Armstrong says, "but how much that is varies from state to state."

In many states, he says, insurance and annuity proceeds are exempt from creditors -- "but bankruptcy is a strange thing. It's a federal law, yet depends on state interpretation."

Armstrong advises those who want additional coverage to get professional help.

"Any kind of asset-protection planning should be a part of financial and estate planning," he says. "There are many things you can do, but each has potential flaws."


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