Forms of Asset Protection

Ownership by the Other Spouse–It is not uncommon for a spouse with high liability exposure to transfer assets to his or her spouse with a lower risk profile. Tenancy by the Entirety (TBE)–TBE refers to assets titled in the name of husband and wife. A creditor of one spouse may not reach TBE property unless and until the non-debtor spouse dies or the TBE is severed by the divorce of the parties. Retirement Assets–State law protects IRAs from the creditors. Federal law protects qualified plans such as 401(k)s. This protection applies to the account owners. Whether it extends to beneficiaries who inherit the accounts is an open question. According to the Supreme Court, the answer is no, at least in […]

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2018 HSA Limits Announced

The IRS has announced the maximum amount an individual can contribute to a Health Savings Account (HSA) in 2018. For individuals with self-only coverage, the HSA limit will be $3,450. For individuals with with family coverage, the limit will be $6,900. In order to qualify for an HSA, you must be enrolled in a “high deductible health plan.” For calendar year 2018, a “high deductible health plan” is defined as a health plan with an annual deductible that is not less than $1,350 for self-only coverage or $2,700 for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6,650 for self-only coverage or $13,300 for family coverage. Earlier posts about HSAs: Are HSAs Protected […]

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Are HSAs Protected from Creditors?

Yes: Except as provided in subsection (c), any funds or other assets payable to a participant or beneficiary from, or any interest of any participant or beneficiary in, a retirement plan which is qualified under §§ 401(a), 403(a), 403(b), 408 and 408A, or an Archer medical savings account qualified under § 220 or a health savings account qualified under § 223 of the Internal Revenue Code of 1986, as amended, are exempt from any and all claims of creditors of the participant or beneficiary, except the state of Tennessee. All records of the debtor concerning such plan and of the plan concerning the debtor’s participation in the plan, or interest in the plan, are exempt from the subpoena process. The […]

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HSAs for Retirement Planning

Although many people think of Health Savings Accounts (HSAs) as simply a vehicle to pay current medical expenses, they can also be a valuable component of retirement savings. Contributions can be invested like a 401(k), and the growth inside the account is not taxed currently. Prior to age 65, distributions for qualified medical expenses, long-term care insurance, COBRA coverage, and health coverage while receiving unemployment compensation are tax-free. Other distributions are subject to tax, as well as a 20% penalty. Starting at age 65, distributions for Medicare premiums for Part A, B, or D and for Medicare HMO are tax-free. Other distributions are taxable, but are not subject to the 20% penalty. Thus, much like an IRA, you can defer income […]

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