IRA Creditor Protection in Florida

Florida Statute 222.21 protects IRAs from creditor claims without any dollar limit. Traditional IRAs, Roth IRAs, SEP-IRAs, SIMPLE IRAs, rollover IRAs, and inherited IRAs are all exempt from the claims of judgment creditors under Florida law. The protection applies both outside bankruptcy and in bankruptcy proceedings where the debtor uses Florida exemptions.

The statutory language is broad. Section 222.21(2)(a) exempts any money or other assets payable to an owner, participant, or beneficiary from a fund or account that qualifies as a retirement plan under the Internal Revenue Code. The exemption covers the full account balance regardless of size, which distinguishes Florida from many other states that impose dollar caps or needs-based limitations.

Types of IRAs Protected

Section 222.21 covers every IRA variety recognized by the Internal Revenue Code. Traditional and Roth IRAs receive full protection, as do SEP-IRAs established by small business owners for themselves and employees, and SIMPLE IRAs offered through employer plans at companies with fewer than 100 employees. Self-directed IRAs that invest in alternative assets such as real estate or private equity are also covered, provided the account holder complies with IRS prohibited transaction rules.

Self-directed IRA protection can be lost if the account holder uses IRA funds for personal benefit rather than investment. A bankruptcy court denied the exemption for a debtor who used self-directed IRA funds to purchase a vacation condominium and personal vehicles. The funds remained titled in the IRA, but the personal use violated the prohibited transaction rules, destroying the account’s qualified status and its creditor protection.

Inherited and Rollover IRAs

Florida is one of a small number of states that explicitly protects inherited IRAs from creditors. A 2011 amendment to Section 222.21 added subsection (2)(c), which extends the exemption to any interest in a fund or account that a person is entitled to receive as a designated beneficiary under a qualifying plan.

The 2011 amendment also confirmed protection for rollover IRAs. A debtor who separates from an employer and rolls a 401(k) balance into a traditional IRA does not lose creditor protection during the transfer.

The inherited IRA protection under Florida law is significant because federal bankruptcy law does not protect inherited IRAs. The U.S. Supreme Court held in 2014 that inherited IRAs do not qualify for the federal bankruptcy IRA exemption because the beneficiary did not set aside the funds for retirement. Florida residents filing bankruptcy with Florida exemptions can still protect inherited IRAs under Section 222.21, but beneficiaries in states without similar statutory protection may find inherited IRAs exposed.

Florida residents with children or other beneficiaries living in states that do not protect inherited IRAs should consider leaving the beneficiary’s share to a trust with spendthrift provisions rather than naming the beneficiary directly on the IRA. A spendthrift trust protects the inherited assets from the beneficiary’s creditors regardless of which state the beneficiary resides in, making it a more reliable strategy than relying on state exemption law alone.

Exceptions to IRA Protection

Florida’s IRA exemption does not apply in every situation. Divorce proceedings can divide IRA assets as part of equitable distribution, regardless of the exemption. A qualified domestic relations order can direct the transfer of IRA funds to a former spouse.

Fraudulent contributions to an IRA can also forfeit the protection. A debtor who converts non-exempt assets into IRA contributions while facing a creditor claim may be subject to a court order permitting the creditor to garnish the IRA despite the statutory protection. The contribution itself may be treated as a fraudulent conversion under Florida Statute 222.30, which prohibits converting non-exempt property into exempt property with the intent to hinder, delay, or defraud creditors. Regular contributions within annual IRS limits that follow a longstanding pattern are defensible. A large, unusual contribution made after a creditor threat is not.

A blanket security agreement may also waive IRA protection. The Eleventh Circuit held that a debtor who signed a security agreement with a broad collateral definition effectively waived the Section 222.21 exemption for his IRA, even though the agreement did not specifically identify the IRA as collateral. This decision remains controversial and the Florida Legislature has attempted to pass corrective legislation. IRA owners should review loan documents carefully to avoid inadvertently pledging exempt retirement assets.

Protection After Withdrawal

The statutory exemption clearly applies to funds held inside an IRA. Protection becomes less certain once funds are withdrawn and deposited into a personal bank account. Florida courts have reached inconsistent conclusions on whether IRA distributions retain their exempt status after deposit.

Required minimum distributions and periodic retirement distributions have a stronger claim to continued protection than discretionary lump-sum withdrawals. A debtor who takes a large distribution and deposits the funds in a general checking account risks losing the exemption if a creditor serves a writ of garnishment on the bank.

The safest practice is to deposit IRA distributions into a segregated bank account that holds only retirement funds. Segregation preserves the ability to trace the funds back to the exempt source. Commingling IRA distributions with non-exempt income in a single account makes tracing difficult and gives creditors a stronger argument that the funds have lost their protected character. The retirement account withdrawals analysis covers this issue in more detail. Annuity withdrawals, by contrast, are expressly protected after distribution under a separate statute.

ERISA Plans vs. IRAs

Employer-sponsored retirement plans that qualify under the Employee Retirement Income Security Act receive a different and generally stronger form of protection than IRAs. ERISA’s anti-alienation provision operates under federal law and preempts state creditor claims. A 401(k), 403(b), or traditional pension plan subject to ERISA cannot be reached by creditors regardless of which state’s law applies.

IRAs do not qualify as ERISA plans. IRA protection depends entirely on state law, which varies considerably across jurisdictions. Florida’s unlimited exemption under Section 222.21 is among the most generous in the country, but a Florida resident who moves to a state with a capped or needs-based IRA exemption may lose a portion of the protection.

In federal bankruptcy, the distinction also matters. ERISA-qualified plans are exempt from the bankruptcy estate without any dollar limit. Traditional and Roth IRAs are subject to a federal bankruptcy exemption cap of approximately $1.7 million for the 2025 to 2028 period. Florida residents who file bankruptcy using Florida exemptions can claim the unlimited state exemption instead of the federal cap, which makes Florida’s opt-out from federal bankruptcy exemptions particularly valuable for IRA owners with large account balances.

IRA Protection by State

Most states provide some level of IRA creditor protection, but the scope varies significantly. Florida offers unlimited protection for all IRA types including inherited IRAs. Several states impose dollar caps, limit protection to amounts reasonably necessary for support, exclude Roth IRAs, or deny protection for inherited IRAs.

States with limited or no Roth IRA protection include California, Georgia, Maine, Mississippi, Nebraska, and West Virginia. States that impose dollar caps on IRA protection include Minnesota, Nevada, North Dakota, and South Dakota. The full IRA protection by state comparison covers all 50 states with their specific statutory provisions and limitations.

Florida residents who move to one of these states should evaluate whether the new state’s exemptions adequately protect their retirement assets before completing the relocation.