Bankruptcy Law Questions? Ask a Bankruptcy Lawyer.
Hi - my name is XXXXX XXXXX I'm a Bankruptcy attorney here to assist you.
Many private annuities are not exempt from the Bankruptcy estate - even though they are retirement accounts.
Is this account tax-deferred? In other words, did you not pay income tax on the money that went into the account?
Yes, the money deposited into the account has been taxed.
Retirement funds are exempt only "to the extent that those funds are in a fund or account that is exempt from taxation under...the Internal Revenue Code". Bankruptcy Stat. 522(a)(3)(C). It is not enough that the funds in the account are going to be used for retirement.
Unfortunately, since the money that went into your retirement plan was not tax-exempt, that plan would also not be exempt from the Bankruptcy estate.
The funds in the account ARE currently exempt from Income Taxes. When I begin to withdraw those funds as an annuity payout monthly only the interest earned is taxable because the deposits into the account have already been taxed.
Does this change your answer?