IRA Creditor Protection in Florida

Florida law protects every type of IRA from creditor claims with no dollar limit. Traditional IRAs, Roth IRAs, SEP-IRAs, SIMPLE IRAs, rollover IRAs, and inherited IRAs are all exempt under Section 222.21 of the Florida Statutes, both outside bankruptcy and in bankruptcy proceedings where the debtor uses Florida exemptions.

The exemption covers the full account balance regardless of size. Florida imposes no cap on IRA creditor protection, so a physician, business owner, or other professional whose IRA exceeds the federal bankruptcy cap of $1,711,975 keeps the entire account.

Which IRA Types Does Florida Protect?

Florida protects every kind of IRA, including the SEP and SIMPLE accounts small businesses use. Section 222.21 gets there by naming the two Internal Revenue Code sections that cover individual retirement accounts. Self-directed IRAs that invest in real estate or private equity qualify on the same terms. The exemption turns on whether the account has been maintained in accordance with the plan or governing instrument the IRS approved for it. A self-directed account’s governing documents can impose restrictions the tax code does not.

Self-directed IRA protection can be lost if the account holder uses IRA funds for personal benefit rather than investment. The Eleventh Circuit affirmed the denial of the exemption in Yerian v. Webber, 927 F.3d 1223 (11th Cir. 2019), where the debtor stayed in an IRA-owned condominium and titled IRA-owned cars in his and his wife’s names. The exemption failed because the account was not maintained in accordance with its own governing instrument, not because it had lost its tax-exempt status.

Are Inherited IRAs Protected from Creditors in Florida?

Florida is one of eleven states whose exemption statutes name inherited IRAs. A 2011 amendment to Section 222.21 keeps exempt money exempt when it passes at the owner’s death by direct transfer or eligible rollover into an inherited IRA. The Legislature applied that rule retroactively, whenever the account was created. Rollover IRAs are protected on a separate ground, because the statute exempts Section 408 accounts by name. A debtor who leaves an employer and rolls a 401(k) balance into a traditional IRA does not lose creditor protection during the transfer.

Federal bankruptcy law does not extend the same treatment to inherited IRAs. The U.S. Supreme Court held in Clark v. Rameker, 573 U.S. 122 (2014), that inherited IRAs are not “retirement funds” under the federal bankruptcy exemption. The Court identified three characteristics that distinguish inherited IRAs from regular IRAs: the beneficiary cannot make additional contributions, must take required minimum distributions regardless of age, and can withdraw the entire balance at any time without penalty.

Whether Clark v. Rameker applies turns on the rollover election, not on the beneficiary’s identity. A surviving spouse who rolls the inherited account into a personal IRA becomes the owner and keeps the standard exemption. A spouse who leaves the account titled as an inherited IRA is inside the holding, the same as any non-spouse beneficiary.

Florida residents filing bankruptcy with Florida exemptions can still protect inherited IRAs under Section 222.21, because Florida opted out of the federal exemption list and uses its own. The two routes are separate: Clark v. Rameker closes the federal one for inherited accounts, and the Florida statute leaves the state one open. A beneficiary who claims the federal exemptions cannot exempt an inherited IRA as retirement funds. In a state whose own statute stops short of inherited accounts, the beneficiary has no state route either.

Florida residents whose children or other beneficiaries live in states without inherited IRA protection can name a spendthrift trust as the IRA beneficiary instead of naming the individual. The account then passes into a trust rather than into the beneficiary’s own hands. The trust’s terms and the trust law that governs it decide what the beneficiary’s creditors can reach, not whether the beneficiary’s state names inherited IRAs in its exemption statute. Florida’s creditor exemptions govern in Florida courts. They do not control what a creditor can reach where the beneficiary lives.

What Can Override Florida’s IRA Protection?

Florida’s IRA exemption does not hold against a divorce award, a surviving spouse’s elective share, or a fraudulent conversion of non-exempt assets into the account.

The statute names two of those claims: an alternate payee under a qualified domestic relations order, and a surviving spouse under an order determining elective share. A divorce court can therefore award the other spouse part of the account. The interest that spouse receives is then exempt from that spouse’s own creditors, except the Florida Department of Revenue. A 2022 amendment makes an interest transferred incident to divorce exempt in the recipient’s hands from the moment it is received, whatever the date of the transfer.

Fraudulent contributions can also forfeit the protection. Florida Statute 222.30 bars converting non-exempt property into exempt property to defraud creditors. A debtor who moves non-exempt assets into IRA contributions while facing a creditor claim risks losing the statutory shield. Regular contributions within annual IRS limits that follow a longstanding pattern are defensible. A large, unusual contribution after a creditor threat, or a Roth conversion timed to move assets beyond a creditor’s reach, invites closer scrutiny. Proving actual fraudulent intent remains the creditor’s burden.

Section 222.21 includes no waiver provision, so a blanket exemption-waiver clause in a loan agreement leaves the IRA protected. Pledging the account is a different problem. The tax code treats the pledged portion as distributed to the owner in the year of the pledge. A deemed distribution from a traditional IRA is taxable income. No Florida decision says whether the exemption still covers the pledged portion.

Does the IRA Need to Be Held in Florida?

Section 222.21 does not require the IRA to be maintained at a Florida financial institution. A Florida resident’s IRA held at an out-of-state brokerage or bank is still exempt under the statute, and no Florida case has required an in-state custodian as a condition of protection.

The practical risk is enforcement in another state. A creditor holding a judgment can garnish the account where the institution sits, and the court hearing that garnishment applies its own state’s exemption law. A Florida debtor who wants Florida law applied instead has to raise the argument in that court. The argument weakens considerably when the account itself sits in another state. Moving the account to a Florida institution narrows the exposure without removing it.

Wherever the account sits, the exemption is not self-executing. A debtor served with a garnishment writ has to claim the exemption inside the statutory window. A court can strike an untimely claim. Courts have enforced the deadline against money nobody disputed was exempt: one debtor lost his retirement accounts because the claim came in about two months late.

Do IRA Withdrawals Keep Their Protection?

Whether IRA money keeps Florida’s exemption after a withdrawal is unsettled. No Florida appellate court has decided the question, and federal bankruptcy judges applying Florida law have gone both ways. The exemption covers money that is still inside the account.

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 funds back to their exempt source. Commingling distributions with non-exempt income makes tracing difficult and strengthens a creditor’s argument that the funds have lost their protected character. How much protection retirement account withdrawals retain depends on the distribution type, account structure, and the debtor’s ability to trace the funds.

How Does Florida’s IRA Exemption Compare to the Federal Bankruptcy Cap?

Florida’s exemption has no ceiling, while the federal bankruptcy exemption caps IRAs at $1,711,975. A Florida debtor in bankruptcy can claim the state exemption instead, so the federal cap binds only a debtor whose exemptions come from the federal list. Employer plans sit outside this comparison. A 401(k), a 403(b), or a pension covered by ERISA stays protected against ordinary judgment creditors in bankruptcy and outside it, except where ERISA itself carves out an exception. The federal cap does not touch them.

The Eleventh Circuit held in In re Baker (2009) that section 222.21 requires a profit-sharing plan to qualify under Internal Revenue Code section 401(a), and it does not require ERISA compliance.

IRAs are not ERISA plans, so outside bankruptcy their protection depends entirely on state law. Inside bankruptcy the federal cap reaches only contributory traditional and Roth IRAs: the money the owner put in and its earnings. SEP-IRAs and SIMPLE IRAs sit outside the cap by the statute’s own terms. The ceiling itself moves with inflation every three years, most recently on April 1, 2025.

Rollover IRAs that hold funds transferred from a qualified plan such as a 401(k) are not counted toward this cap and retain unlimited bankruptcy protection. Keeping rollover funds in a separate IRA from contributory funds preserves traceability and prevents commingling from placing the entire balance under the cap.

Maintaining a separate rollover IRA is worth doing even in Florida, because a later move can change which state’s exemption law applies. In bankruptcy that switch is not immediate. The exemptions that govern are those of the state where the debtor was domiciled for the 730 days before filing. A debtor who moves and files within two years is still judged by the old state’s law.

How Does Florida Compare to Other States?

Florida’s IRA exemption is unlimited and covers every type of IRA, inherited accounts included, which puts it among the strongest in the country. Every state gives an IRA at least some protection from judgment creditors. Several states impose dollar caps, limit protection to amounts reasonably necessary for the debtor’s support, exclude certain IRA types, or deny protection for inherited IRAs.

States with weaker protections may apply contribution lookback periods that deny the exemption for last-minute transfers into IRAs. Alaska, Arizona, Kentucky, Maine, and Michigan all refuse the exemption to contributions made in the 120 days before a bankruptcy filing. In Kentucky and Maine the same 120-day window also applies outside bankruptcy, running back from whichever came first, the judgment or the levy. Florida has no contribution lookback period in its exemption statute, though contributions made with actual intent to defraud creditors can still be challenged under the fraudulent conversion statute.

Florida residents considering relocation should evaluate whether the new state’s exemptions adequately protect their retirement assets before completing the move. More than a dozen states impose IRA exemption caps, lookback periods, or inherited-IRA exclusions that Florida does not, and the differences can mean hundreds of thousands of dollars in lost protection.