How to open an IRA account in a Florida financial institution or branch

[deban]

What is the name of your state (only U.S. law)? Florida

I wish to open a personal Roth IRA account with a financial company located in New York. When I called over the phone, they said that Florida residents can open an account with that company and, in fact, any resident from any state in the US can open an account over the phone or online with them. I read the following over the internet:

IRA accounts are best maintained in a Florida financial institution or branch to be covered by Florida’s exemption law that protects the IRA account from future creditors. I also read that the financial accounts are situated at the branch office where the account is maintained. For example, if a Georgia resident opens an IRA account at a Georgia branch of a national brokerage and subsequently moves to Florida, the IRA account may not be exempt from creditors because it is deemed to be anchored at the branch where it was opened. This person should move the account to a Florida branch of the same brokerage house or to a new broker with Florida offices.

What do I need to do to make sure that my IRA account is maintained in a Florida financial institution or branch in order to get the exemption status? If I open an account with the New York company while I am residing in Florida then will that account be automatically be treated as if it is maintained in a Florida financial institution or branch and get the exemption status automatically?

 

[adjusterjack]

As long as you are a resident of Florida your IRA is exempt from judgment regardless of where the custodian of the account is located.

Read the exemption statute:

http://www.leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=0200-0299/0222/Sections/0222.21.html

If you move to another state your IRA will be subject to that state's exemption, also regardless of where the custodian of the account is located.

Here's a state by state guide. If you want to move away from Florida, check it.

http://www.thetaxadviser.com/content/dam/tta/issues/2014/jan/stateirachart.pdf

 

[Taxing Matters]

As long as you are a resident of Florida your IRA is exempt from judgment regardless of where the custodian of the account is located.

The law of the state where property is located generally determines what is exempt from attachment. Florida cannot exempt property outside its jurisdiction.

 

[deban]

Thank you. By the way, if I die while I am resident of Florida then can a creditor get the money in my IRA account? or my IRA money will be transferred to the beneficiary I have designated?

 

[adjusterjack]

The law of the state where property is located generally determines what is exempt from attachment. Florida cannot exempt property outside its jurisdiction.

Wait.

Are you telling me that my IRAs are not covered by the Arizona exemption because Ameritrade is located in Nebraska where the exemption is meager?

 

[Taxing Matters]

Wait.

Are you telling me that my IRAs are not covered by the Arizona exemption because Ameritrade is located in Nebraska where the exemption is meager?

I’m telling you that the location of the property (situs) matters in determining which state’s law applies to the garnishment. When it comes to intangible property like bank accounts, IRAs, stock in corporations, etc., the law is messy as to where the assets are considered to be located. The laws vary from state to state and vary even in a single state based on the circumstances.

One rule often applied is that the situs of intangible property is where the owner of the property is domiciled:

The longstanding rule in Michigan is that “the situs of intangible assets is the domicile of the owner unless fixed by some positive law.” Rapoport's Estate, 317 Mich. at 301, 26 N.W.2d 777; see also In re Dodge Bros., 241 Mich. 665, 669, 217 N.W. 777 (1928), Mills v. Anderson, 238 Mich. 643, 655–656, 214 N.W. 221 (1927), and 5 Michigan Civil Jurisprudence, Conflict of Laws, § 58, p. 412–413. It is undisputed that defendants' state of domicile is Florida. Therefore, their IRAs are not located “within the boundaries” of Michigan. Because plaintiff cites no “positive law” holding that the situs of an IRA is fixed other than by this general rule and the situs of defendants' IRAs is unquestionably Florida, the IRAs do not fall within the scope of personal property that may be garnished by a Michigan court.​

Macatawa Bank v. Wipperfurth, 294 Mich. App. 617, 620, 822 N.W.2d 237, 238 (2011).

But consider that NY apparently uses a different rule:

Because the situs of intangible property is the location where performance is required, New York has no relation to the transaction between Codelco and Bryggen and therefore cannot be the situs of the debt. See ABKCO Industries, Inc. v. Apple Films, Inc., 39 N.Y.2d 670, 675, 385 N.Y.S.2d 511, 350 N.E.2d 899 (1976) (situs of intangible property, i.e. debt, is the location of the party of whom performance is required).​

Macatra B.V. v. Destiny Navigation, No. 08 CIV.0711 LAP, 2010 WL 339774, at *1 (S.D.N.Y. Jan. 27, 2010). And it gets murky in NY because it appears that a different rule is used for situs where attachment is sought only for security purposes: “In short, under Harris, where a creditor seeks to attach a debt (an intangible form of property) solely for security purposes (i.e., the debtor is subject to the court's personal jurisdiction), the situs of the debt is wherever the debtor is present.” Hotel 71 Mezz Lender LLC v. Falor, 14 N.Y.3d 303, 315, 926 N.E.2d 1202, 1210 (2010). So under that rule, if the garnishee (e.g. Ameritrade) were located in NY the situs of the accounts it has for customers would also be considered located there, at least for security purposes.

In short, it is the situs of the property that matters. While under the law of some states for some purposes the situs of intangible property is the domicile of the owner of the property, that is not true in all states or for all situations. Unfortunately, this is an area where a simple one sentence answer will not suffice to apply to all kind of intangibles in every state. The specific facts and the laws of the states involved matter.

 

[deban]

Thank you for all the details. Now I am resident of Florida. If I open a Roth IRA account with a financial company located in New York or some other state, through its legal agent located in Florida, then will it be protected in the following scenarios:

(i). as long as I am staying in Florida (i.e., as long as I am a Florida resident)

(ii). I left Florida and I moved to another state (i.e., I am no longer a Florid resident) and in that new state Roth IRAs are not protected from creditors

(iii). I left Florida and moved to another country (i.e., I am no longer a Florida resident) where there is no concept of Roth IRAs (and no law of the US is applicable over there).