A caller was concerned that his IRA funds held as his bank’s brokerage department are not protected against an outstanding judgment because of a “set off” provision of the bank’s depositor agreement. The agreement states that “to the extent permitted by applicable law” the lender has a right to set off all of the borrower’s accounts.
Set off pertains to debts owed to the bank where the deposits are held. Set off does not mean that the bank can remove exemptions against debts owed to other creditors. The set off provision of this agreement means that the bank can take money from the caller’s accounts to pay a debt owed to this same bank, but it does not state that the bank can take the depositors money to pay someone else.