Asset protection is an important part of estate planning. A well-constructed estate plan can help you protect your assets from creditor claims and other lawsuits. Notably, annuities and other retirement accounts are among the most effective creditor protection tools available. In this article, our Cortland estate planning attorney explains the key things to know about the protection provided by annuities and other types of retirement accounts.
Federal and State Laws Protect Certain Types of Assets from Lawsuits
Do you have cash in a checking account or savings account? If you are sued, that cash is generally not protected. A creditor or other party in a lawsuit could potentially go after cash savings if you are found legally liable. However, there are certain federal laws and state laws in place that protect certain types of assets from liability. You may be able to protect assets with:
- An annuity (especially with a spouse or child as a beneficiary)
- A tax-advantaged retirement account (IRA, 401(k), etc)
Ohio has some important state laws in place to help people protect their assets. For example, under Ohio’s exempted interests and rights laws, Rev. Code §2329.66(A)(10)(e), individual retirement accounts (IRAs) are generally protected from creditor claims for any debts that are domiciled in the state. There are similar legal protections in place for annuities and other retirement accounts.
Annuities and Retirement Accounts Can Avoid Probate in Ohio
Another estate planning advantage of annuities and retirement accounts is that these assets can avoid Ohio’s probate process. You can pass down the savings in your tax-protected retirement account using a beneficiary designation. Make sure that all of your beneficiary designations are up-to-date. Outdated beneficiary designations can cause problems for you and your loved ones.
Protect Retirement Assets With the Right Safeguards
Retirement savings are about ensuring that you have the financial resources to provide for yourself and your family, no matter what tomorrow might bring. A well-prepared estate plan should have adequate safeguards in place to help ensure that your assets and hard-earned life savings are properly protected from the risk of a lawsuit.
Financial savings kept in a bank account are not protected against creditor claims and other lawsuits. If you use a will to pass down the proceeds of your savings account to an heir, that asset will be required to go through the Ohio probate process. Not only can probate be a slow and frustrating process, but a creditor may make a claim against all or some of those assets.
Speak to an Estate Planning Lawyer in Northeast Ohio
At The Law Office of John C. Grundy, our experienced and seasoned Ohio estate planning attorney has the professional expertise you can trust. If you have any estate planning questions about annuities and retirement accounts, we can help. Contact us today for your completely confidential initial consultation.
With an office in Cortland, we provide estate planning services to families throughout Northeast Ohio, including in Trumbull County, Mahoning County, Portage County, and Geauga County.