Is Your IRA Protected From Lawsuits in California?

An IRA in California is protected from lawsuits, but only conditionally. For ordinary personal debts like credit cards and medical bills, at least $1,711,975 of your IRA is safe. For other kinds of judgments, a court decides case by case how much of the account you actually need for retirement, and the rest can be taken. Certain claims — child support, IRS tax debts, and a few others — can reach your IRA regardless of the usual rules.

The Basic Rule Under California Law

California Code of Civil Procedure section 704.115 draws a sharp line between employer-sponsored retirement plans and individual retirement accounts. Money in a 401(k), a pension, or a union retirement plan is fully exempt from creditor claims. A creditor with a judgment against you cannot touch those funds.¹

IRAs get weaker treatment. Traditional IRAs, Roth IRAs, and self-employed retirement plans are exempt only to the extent the funds are necessary to support you, your spouse, and your dependents in retirement. A court hearing the creditor’s claim will look at your full financial picture and decide how much of the IRA qualifies for protection. Anything the court determines you don’t need for retirement support can be seized to satisfy the judgment.¹

The $1,711,975 Floor for Personal Debts

Under section 704.115(e)(2), when the debt at issue is a “personal debt” — credit card balances, medical bills, personal loans — the amount protected cannot be less than the limit set by federal bankruptcy law. That floor is currently $1,711,975, adjusted for inflation every three years.¹ For most people, this floor effectively protects the entire IRA balance from a personal debt judgment.

The floor does not apply to every claim. If the judgment stems from something other than personal debt — a business obligation or a tort claim like a car accident, for example — the court runs the standard “necessary for support” analysis without any guaranteed minimum. In that scenario, the court has full discretion to decide how much of your IRA to protect.

How Courts Decide What’s “Necessary for Support”

When the floor doesn’t apply, the analysis is fact-intensive. Two central questions drive the outcome: Do you have a present need for the funds? And could you realistically rebuild your retirement savings if the IRA were seized?²

Beyond those, courts look at several personal factors:

Your age and how close you are to retirement. A 62-year-old with a modest IRA has a stronger case for full protection than a 35-year-old with decades of earning potential ahead.
Your health. Chronic illness or disability that limits future earning capacity tips the scale toward protecting more of the account.
Other retirement resources. A pension, Social Security benefits, investment accounts, or income-producing real estate all make it more likely a court will find that part of your IRA exceeds what you need.
Your earning capacity. Someone with in-demand professional skills and years of work ahead may see a larger share of the IRA treated as non-essential.

Courts also account for the tax hit. If part of your IRA is ordered paid to a creditor, section 704.115 requires the court to let you keep enough additional funds to cover the federal and state income taxes triggered by the forced distribution.¹ That provision prevents you from losing money twice, once to the creditor and again to the IRS.

Some IRAs Get Better Protection Than Others

The type of IRA you hold matters, and this is one of the most commonly misunderstood parts of California IRA protection.

Rollover IRAs hold funds that originated in an employer-sponsored plan like a 401(k) or 403(b). Federal bankruptcy law explicitly excludes rollover contributions, and earnings on those contributions, from the $1,711,975 cap. Rollover money keeps the unlimited protection it enjoyed inside the employer plan.³ If you rolled $800,000 from a former employer’s 401(k) into an IRA and later added $200,000 of your own contributions, only the $200,000 counts against the cap. The catch: you have to prove which dollars came from a rollover. Commingling rollover funds with personal contributions in the same account without records makes this far harder.

SEP-IRAs and SIMPLE IRAs are also excluded from the cap. Section 522(n) applies only to IRAs described in IRC sections 408 and 408A, and it carves out simplified employee pensions under section 408(k) and SIMPLE accounts under section 408(p).³ Because these are employer-established plans, they receive broader protection in bankruptcy, similar to a 401(k), with no dollar ceiling.

For non-bankruptcy judgments under California state law, the picture is different. Section 704.115 subjects self-employed retirement plans and IRAs to the “necessary for support” limitation, though the $1,711,975 floor still applies for personal debts.¹

When Creditors Can Reach Your IRA Anyway

Several categories of claims cut through IRA protection regardless of how much you need the money for retirement.

Child Support and Spousal Support

California law explicitly lets creditors reach retirement funds, including fully exempt employer-sponsored plans, to satisfy child support, family support, or spousal support judgments. Even the broad protection of section 704.115(b) yields to a valid support order. The exemption in support cases is limited to what the court determines under a separate analysis in section 703.070, and periodic payments from the account can be garnished under the same rules that apply to wage garnishment for support obligations.¹ This is the most common way IRAs lose their protection in California.

IRS Tax Debts

The IRS can levy on virtually all property to collect unpaid federal taxes, and that includes retirement accounts. Neither California’s exemption statute nor the federal bankruptcy protections shield an IRA from an IRS tax levy outside of bankruptcy.⁴ As an internal policy matter, the IRS generally will not levy on retirement accounts unless the taxpayer engaged in “flagrant conduct,” a term that broadly covers intentional tax evasion. That policy is not a legal safeguard you can enforce in court.

Prohibited Transactions

An IRA’s creditor protection depends on the account keeping its tax-exempt status. If you engage in a prohibited transaction with your IRA, the account stops being an IRA as of the first day of that tax year. The IRS treats the full balance as distributed to you, triggering income tax on the whole amount.⁵ Once the account loses tax-exempt status, the funds no longer qualify for the exemption under either California law or federal bankruptcy law.

Prohibited transactions include using IRA assets to benefit yourself directly: lending money from the account to yourself, buying property for personal use, or conducting business deals between the IRA and a disqualified person like a family member.⁶ Self-directed IRA holders who invest in real estate or private businesses are the most likely to stumble into this.

Last-Minute Transfers Into the IRA

Moving money into an IRA right before a lawsuit or bankruptcy filing to shelter it from creditors can backfire. Under federal bankruptcy law, a trustee can claw back a transfer made within two years before filing if it was made with intent to hinder or defraud creditors.⁷ California has its own fraudulent transfer laws with similar reach. If you suddenly max out IRA contributions after learning about a pending lawsuit, a court can unwind those contributions and make the funds available to the creditor. The contributions must fit your normal pattern of retirement saving to survive scrutiny.

Inherited IRAs Are Different

If you inherit an IRA from someone other than your spouse, the account loses most of its creditor protection. The U.S. Supreme Court held in Clark v. Rameker (2014) that inherited IRAs are not “retirement funds” for purposes of the federal bankruptcy exemption. You cannot add money to an inherited IRA, you must take distributions regardless of your age, and you can withdraw the entire balance at any time without penalty. On those grounds the Court treated the account as something other than a retirement savings vehicle.⁸

The practical result is that funds in an inherited IRA can be seized by a bankruptcy trustee and, in many cases, by judgment creditors outside of bankruptcy. Many beneficiaries who inherit large accounts assume the same protections that applied to the original owner carry over. They don’t.

Surviving spouses are the exception. A spouse who inherits an IRA can roll the funds into their own IRA, and by doing so the money regains full protection as the spouse’s own retirement account.⁸ Non-spouse beneficiaries do not have this option.

Protection in Bankruptcy

Filing for bankruptcy triggers a separate set of rules. California opted out of the general federal bankruptcy exemptions under 11 U.S.C. § 522(d), so you use California’s own exemption schedules for most assets.⁹ The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 created a separate retirement-fund exemption under 11 U.S.C. § 522(b)(3)(C) that applies regardless of which state you live in.¹⁰

Under this federal provision, traditional and Roth IRA assets are protected up to an aggregate cap of $1,711,975 per person for cases filed in 2026. The figure adjusts every three years; the most recent increase took effect on April 1, 2025.³ Any balance above the cap can be claimed by the bankruptcy trustee and distributed to creditors, though a bankruptcy court has discretion to raise the limit if the interests of justice require it.

The advantage of the bankruptcy exemption is clarity. There is no subjective “necessary for support” test, and the dollar cap applies uniformly. For IRA holders with balances under $1.7 million, the bankruptcy exemption effectively protects the entire account.

1
California Legislative Information. California CCP 704.115
2
American Bankruptcy Institute. In California, Strategies Abound For Protecting Retirement Funds From Creditors
3
Office of the Law Revision Counsel. 11 USC 522 – Exemptions
4
Office of the Law Revision Counsel. 26 USC 6331 – Levy and Distraint
5
Internal Revenue Service. Retirement Topics – Prohibited Transactions
6
Office of the Law Revision Counsel. 26 USC 4975 – Tax on Prohibited Transactions
7
Office of the Law Revision Counsel. 11 USC 548 – Fraudulent Transfers and Obligations
8
Justia U.S. Supreme Court Center. Clark v. Rameker
9
California Legislative Information. California CCP 703.130
10
GovInfo. Public Law 109-8 – Bankruptcy Abuse Prevention and Consumer Protection Act of 2005