California Private Retirement Plans Adkisson's CALIFORNIA PRIVATE RETIREMENT PLANS Creditor Exemptions Under CCP § 704.115(a) Home INTRODUCTION TO CALIFORNIA PRIVATE RETIREMENT PLANS California provides an exemption for Private Retirement Plans, including - almost uniquely among states - plans that are not tax-qualified. This creates the potential to use the exemption for asset protection planning, if properly done. However, it is that last phrase "if properly done" which causes considerable angst for technical planners, but unfortunately little for the numerous promoters of such plans that are out there hawking them as a cure-all "bulletproof" asset protection device (which they are not). The California Private Retirement Plan is a planning vehicle that is exempt by statute, more specifically California Code of Civil Procedure § 704.115(a)(1) and (b) which provides: (a) As used in this section, “private retirement plan” means: (1) Private retirement plans, including, but not limited to, union retirement plans. * * * (b) All amounts held, controlled, or in process of distribution by a private retirement plan, for the payment of benefits as an annuity, pension, retirement allowance, disability payment, or death benefit from a private retirement plan are exempt. A California Private Retirement Plan ("PRP") typically involves an agreement between an employer and an employee, whereby the employer will set up a Private Retirement Trust ("PRT") for the benefit of the employee (or some or all employees, depending on the type of plan), and will regularly fund the Trust according to some schedule. When the specified retirement event occurs, the Trust will then begin to make distributions to the employee, also according to schedule. There are several ways for creditors to successfully bust these plans, not the least of which being, as amply demonstrated by the case-law: No Plan or Failed Plan - The plan was not created or operated as a bona fide "retirement plan", but simply was the debtor's personal piggy-bank; or Fraudulent Transfer - The transfers to the plan violated the California Uniform Voidable Transactions Act (CUVTA) or California common-law fraudulent transfer. The exemption arises under CCP § 704.115, which is reprinted in full below. One more thing: The legislative history of CCP § 704.115 shows that this section was adopted in 1982, became effective in 1983, and the first opinion regarding the statute was handed down in 1985 in the federal bankruptcy case of In re Daniel. The point is that CCP § 704.115 is hardly anything like new law, but instead has been around in substantially the same form for over 30 years. It is only in the last few years, however, that private retirement plans have become a "hot topic" for asset protection planners, which is something attributed far more to aggressive marketing by promoters than the statute or the wealth of case law on the subject. The more realistic view of private retirement plans is that they can be an important piece of an asset protection plan when conservatively utilized, but should only be that -- a subsidiary piece of the plan, and not the central piece de resistance of a plan. As the case law demonstrates, overloading a private retirement plan just for creditor protection is an inherently bad idea. Yet, this is exactly what is being widely marketed today. Caveat emptor! ARTICLES ON CALIFORNIA PRIVATE RETIREMENT PLANS 2020.01.20 ... California Retirement Plan For Asset Protection Purpose Fails To Qualify For Creditor Exemption In O’Brien 2019.12.28 ... The California Private Retirement Plan: Separating Fact From Fiction TEXT OF CCP § 704.115 California Code of Civil Procedure § 704.115. (a) As used in this section, “private retirement plan” means: (1) Private retirement plans, including, but not limited to, union retirement plans. (2) Profit-sharing plans designed and used for retirement purposes. (3) Self-employed retirement plans and individual retirement annuities or accounts provided for in the Internal Revenue Code of 1986, as amended, including individual retirement accounts qualified under Section 408 or 408A of that code, to the extent the amounts held in the plans, annuities, or accounts do not exceed the maximum amounts exempt from federal income taxation under that code. (b) All amounts held, controlled, or in process of distribution by a private retirement plan, for the payment of benefits as an annuity, pension, retirement allowance, disability payment, or death benefit from a private retirement plan are exempt. (c) Notwithstanding subdivision (b), where an amount described in subdivision (b) becomes payable to a person and is sought to be applied to the satisfaction of a judgment for child, family, or spousal support against that person: (1) Except as provided in paragraph (2), the amount is exempt only to the extent that the court determines under subdivision (c) of Section 703.070. (2) If the amount sought to be applied to the satisfaction of the judgment is payable periodically, the amount payable is subject to an earnings assignment order for support as defined in Section 706.011 or any other applicable enforcement procedure, but the amount to be withheld pursuant to the assignment order or other procedure shall not exceed the amount permitted to be withheld on an earnings withholding order for support under Section 706.052. (d) After payment, the amounts described in subdivision (b) and all contributions and interest thereon returned to any member of a private retirement plan are exempt. (e) Notwithstanding subdivisions (b) and (d), except as provided in subdivision (f), the amounts described in paragraph (3) of subdivision (a) are exempt only to the extent necessary to provide for the support of the judgment debtor when the judgment debtor retires and for the support of the spouse and dependents of the judgment debtor, taking into account all resources that are likely to be available for the support of the judgment debtor when the judgment debtor retires. In determining the amount to be exempt under this subdivision, the court shall allow the judgment debtor such additional amount as is necessary to pay any federal and state income taxes payable as a result of the applying of an amount described in paragraph (3) of subdivision (a) to the satisfaction of the money judgment. (f) Where the amounts described in paragraph (3) of subdivision (a) are payable periodically, the amount of the periodic payment that may be applied to the satisfaction of a money judgment is the amount that may be withheld from a like amount of earnings under Chapter 5 (commencing with Section 706.010) (Wage Garnishment Law). To the extent a lump-sum distribution from an individual retirement account is treated differently from a periodic distribution under this subdivision, any lump-sum distribution from an account qualified under Section 408A of the Internal Revenue Code shall be treated the same as a lump-sum distribution from an account qualified under Section 408 of the Internal Revenue Code for purposes of determining whether any of that payment may be applied to the satisfaction of a money judgment. COURT OPINIONS Published Court Opinions regarding California private retirement plans (sorted by date): In re Daniel, 771 F.2d 1352 (9th Cir., 1985). In re Bloom, 839 F.2d 1376 (9th Cir., 1988). In re Crosby, 162 B.R. 276 (Bk.C.D.Cal., 1993). Yaesu Electronics Corp. v. Tamura, 28 Cal.App.4th 8, 33 Cal.Rptr.2d 283 (1994). Schwartzman v. Wilshinsky, 50 Cal.App.4th 619, 57 Cal.Rptr.2d 790 (1996). In re Friedman, 220 B.R. 670 (9th Cir.B.A.P., 1998). In re Phillips, 206 B.R. 196 (Bk.N.D.Cal., 1997). In re Lieberman, 245 F.3d 1090 (9th Cir., 2001). In re Barnes, 275 B.R. 889 (Bk.E.D.Cal., 2002). In re Stern, 345 F.3d 1036 (9th Cir., 2003). McMullen v. Haycock, 147 Cal.App.4th 753, 54 Cal.Rptr. 3d 660 (2007). In re Rucker, 570 F.3d 1155 (9th Cir., 2009). In re Segovia, 404 B.R. 896 (2009). In re Simpson, 557 F.3d 1010 (2009). In re Beverly, 374 B.R. 221 (9th Cir., B.A.P., 2011). In re Chen, 2011 WL 2358653 (Bk.N.D.Cal., 2011). Marriage of La Moure, 221 Cal.App.4th 1463, 15 Cal.Rptr.3d 417 (2013). Salameh v. Tarsadia Hotel, 2015 WL 6028927 (S.D.Cal., 2015). O'Brien v AMBS Diagnostics, LLC, 38 Cal.App.5th 553, 251 Cal.Rptr.3d 41 (Aug. 8, 2019). Only published court opinions are included above; non-published opinions are not useful as legal precedent and should not be relied upon for any purpose. Nonetheless, the following unpublished opinions below may be of some interest. Gluck v. Sarkissian, 2021 WL 5407188 (Cal.App., 2nd Distr., Unpublished, Nov. 19, 2012). MAIN SECTIONS OF THIS WEBSITE Leading Court Opinions and Legislative History of CCP § 704.115 -- The published court opinions, both state and federal, and the legislative history of CCP § 704.115 give valuable insight into how California private retirement plans should be properly structured and used. See Court Opinions and Legislative History page. Voidable Transactions Issues (formerly: Fraudulent Transfers) -- As amply demonstrated by the case law, the law of voidable transactions (formerly: fraudulent transfers) has frequently and successfully been used by creditors to avoid transfers made to California Private Retirement Plans. Please see our Voidable Transactions page for more. Plan Defect Issues -- Creditors have frequently been successful in busting California Private Retirement Plans because either (1) there was no real "plan", or (2) the plan was not substantially followed by the debtor. Read more on our Plan Defect Issues page. ERISA, Tax-Qualified Plans and Non-Tax Qualified Plans -- Considers the types of private retirement plans as measured by ERISA and tax law, including ERISA-qualified plans, tax-qualified plans, and non-qualified plans. Read more on our ERISA and Tax Issues page. Post-Distribution Exemption-Tracing Issues -- Considers the application of the exemption tracing statute, CCP § 703.080, to California Private Retirement Plans. Please visit our Post-Distribution Exemption-Tracing Issues page. Services & Contact Information -- Jay Adkisson assists clients in creating California Private Retirement Plans in appropriate circumstances, and reviews existing plans for their defensibility against creditor challenges. Jay is also involved with litigation in attacking PRPs from the creditor's side, and defending them from the debtor's side. Please see our Services & Contact Information page. MORE INFORMATIONAL WEBSITES BY JAY ADKISSON Jay Adkisson - More about Jay D. Adkisson, background, books, articles, speaking appearances. Captive Insurance - Licensed insurance companies formed by the parent organization to handle the insurance and risk management needs of the business. Asset Protection - The all-time best-selling book on asset protection planning by Jay Adkisson and Chris Riser. Collecting On A Judgment - An explanation of common creditor remedies, strategies and tactics to enforce a judgment, including a discussion of common debtor asset protection strategies. Voidable Transactions - Discussion of the Uniform Voidable Transactions Act (a/k/a 2014 Revision of the Uniform Fraudulent Transfers Act) and fraudulent transfer law in general. Charging Orders - The confusing remedy against a debtor's interest in an LLC or partnership is explained in reference to the Uniform Partnership Act, the Uniform Limited Partnership Act, and the Uniform Limited Liability Company Act. Protected Series - An examination of the single most complex statutory legal structure yet created, with particular reference to the Uniform Protected Series Act of 2017. 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Jay is a Managing Partner of Adkisson Pitet LLP. © 2021 by Jay D. Adkisson. All Rights Reserved. No claim to original government works. The information contained in this website is for general educational purposes only, does not constitute any legal advice or opinion, and should not be relied upon in relation to particular cases. Use this information at your own peril; it is no substitute for the legal advice or opinion of an attorney licensed to practice law in the appropriate jurisdiction. Questions about this website should be directed to jay [at] jayad.com or by phone to 702-953-9617 or by fax to 877-698-0678. This website is https://privateretirementplans.com