A former spouse does have a legal basis to try to enforce the judgment for alimony against an IRA and 401(k) in New York. The accounts would fall within this exception in CPLR 5205(c)(4) and would not be exempt under these circumstances. See a comprehensive analysis of the law below…
Section 5205(c) makes an IRA and a 401(k) exempt from satisfaction of a money judgment:
“(c) Trust exemption. 1. Except as provided in paragraphs four and five of this subdivision, all property while held in trust for a judgment debtor, where the trust has been created by, or the fund so held in trust has proceeded from, a person other than the judgment debtor, is exempt from application to the satisfaction of a money judgment.
2. For purposes of this subdivision, all trusts, custodial accounts, annuities, insurance contracts, monies, assets or interests established as part of, and all payments from, either any trust or plan, which is qualified as an individual retirement account under section four hundred eight or section four hundred eight A of the United States Internal Revenue Code of 1986,1 as amended, a Keogh (HR-10), retirement or other plan established by a corporation, which is qualified under section 401 of the United States Internal Revenue Code of 1986, as amended, or created as a result of rollovers from such plans pursuant to sections 402 (a) (5), 403 (a) (4), 408 (d) (3) or 408A of the Internal Revenue Code of 1986, as amended, or a plan that satisfies the requirements of section 457 of the Internal Revenue Code of 1986, as amended, shall be considered a trust which has been created by or which has proceeded from a person other than the judgment debtor, even though such judgment debtor is (i) in the case of an individual retirement account plan, an individual who is the settlor of and depositor to such account plan, or (ii) a self-employed individual, or (iii) a partner of the entity sponsoring the Keogh (HR-10) plan, or (iv) a shareholder of the corporation sponsoring the retirement or other plan or (v) a participant in a section 457 plan
3. All trusts, custodial accounts, annuities, insurance contracts, monies, assets, or interests described in paragraph two of this subdivision shall be conclusively presumed to be spendthrift trusts under this section and the common law of the state of New York for all purposes, including, but not limited to, all cases arising under or related to a case arising under sections one hundred one to thirteen hundred thirty of title eleven of the United States Bankruptcy Code, as amended.”
However, CPLR § 5205(c)(4) contains an exception for alimony arrears:
4. This subdivision shall not impair any rights an individual has under a qualified domestic relations order as that term is defined in section 414(p) of the United States Internal Revenue Code of 1986, as amended or under any order of support, alimony or maintenance of any court of competent jurisdiction to enforce arrears/past due support whether or not such arrears/past due support have been reduced to a money judgment. (emphasis added). See also, New York Practice, Enforcing Judgments and Collections, § 7:243 “Mandates for trust to be and remain exempt” (Westlaw 2015).
In addition, CPLR § 5205(c)(5) states that additions to an IRA are not exempt if they are made 90 days before the claim.
5. Additions to an asset described in paragraph two of this subdivision shall not be exempt from application to the satisfaction of a money judgment if (i) made after the date that is ninety days before the interposition of the claim on which such judgment was entered, or (ii) deemed to be fraudulent conveyances under article ten of the debtor and creditor law.
New York courts have considered these issues. For example, in Bayerische Hypo-Und Vereinsbankk AG v. DeGiorgio, 74 A.D. 3d 492 (1st Dept. 2010), the Appellate Division held that a rollover IRA was exempt from attachment by an employer; see also, J.K.C. v. T.W.C., 39 Misc. 3d 899 (Sup. Ct. Monroe Co. 2013)(attorney’s charging lien cannot be asserted against IRA). In Breslin Realty Dev. Corp. v. Morgan Stanley, 48 Misc. 3d 424 (Sup. Ct. Nassau Co. 2015), the court held that additional deposits into retirement accounts made after 90 days before commencement of the action on which judgment is entered were subject to turnover.
The courts that have applied the statute to alimony arrears have ruled that alimony falls within an exception and the trust exception does not prevent collection.
In Smith v. ABC Co., Inc, 2005 N.Y. Misc. LEXIS 3467 (Fam. Ct. Nassau Co. 2005), the court ruled that a trust was not exempt from enforcement of a support order and fell within the exception in CPLR § 5205(c)(4):
“Section 5205(c)(1) provides that with limited exceptions, “all property while held in trust for a judgment debtor, where the trust has been created by *** a person other than the judgment debtor, is exempt from application to the satisfaction of a money judgment.” Section 5205(c)(4), which establishes one of the exceptions to this rule, provides that subdivision (c) “shall not impair any rights an individual has under *** any order of support *** of any court of competent jurisdiction to enforce arrears/past due support whether or not such arrears/past due support have been reduced to a money judgment” (CPLR 5205 [c]. Because CPLR 5205(c) expressly does not exempt the principal of the subject trust from enforcement of a support order, neither does the 90 percent income limitation of CPLR 5205(d) apply, and there is no need pursuant to that statute for the court to render a determination of the “reasonable needs” of the father and his dependents.”
An ex-spouse can reach her former spouse’s 401(k) plan to collect a judgment for arrears and support pursuant to CPLR 5205 (c). Mayer v. Mayer, 12 Misc3d 1151(A)(Fam. Ct., Orange Co. 2006).
In Berger-Carniol v. Carniol, 273 A.D.2d 427 (2d Dept. 2000), the court cited CPLR 5205(c)(4) and held that it was not error to direct the payment of support arrears from an IRA. Even counsel fees that are in the nature of support are coverd by CPLR 5202(c )(4) which prevents a husband from claiming an exemption for pension funds. AB v. GH, 31 Misc.3d 945 (Sup. Ct. N.Y. Co. 2011).
In Carr v. Jonbil, Inc., 245 A.D.2d 369 (2d Dept. 1997), the court held that funds in a husband’s profit sharing plan were exempt under CPLR 5205(c ) from satisfying his wife’s judgment because there was no qualified domestic relations order entered. While this case may appear favorable to your position, since it upheld an exemption where there was no QDRO, the case did not appear to involve alimony and therefore is factually distinguishable from our situation.
In an older decision, the court explained that exemptions were not designed “to help one member of the family avoid his obligation to support the others” and that exemptions “have yielded to claims for alimony and child support. “ Fordyce v. Fordyce, 80 Misc.2d 909 (Sup. Ct., Nassau Co 1974). “The authorities amply provide precedent that the pension or trust fund is not immune from the responsibility of a husband or former husband to provide support for his wife or former wife.” Wanamaker v. Wanamaker, 93 Misc.2s 784 (Fam. Ct., Rockland Co. 1978); see also, Monck v Monck, 184 A.D. 656 (1st Dept. 1918)(exemption not intended to deprive wife of right to support from husband); Gramet v N.Y. State Teacher’s Retirement System, 102 Misc.2d 731 (Sup. Ct., Albany Co. 1979)(“wide-ranging judicial acceptance that alimony and support are exceptions to the statutory exemptions . . . granting of such an exemption would be a subversion of the purpose for exemptions to protect and foster support of the family.); Michel v. Michel, 86 Misc.2d 774 (Fam. Ct., Rensselaer Co. 1976)(exemption does not apply to support “on the theory that an adjudication of alimony or support is not a debt within the meaning of the exemption statutes.”); Jackson v. Jackson, 194 Misc. 134 (Sup. Ct., Queens Co. 1948)(“there is no question that alimony is an exception to the provisions of any statute of exemption.”)
A former spouse does have a legal basis to try to enforce the judgment for alimony against an IRA and 401(k) in New York. The accounts would fall within this exception in CPLR 5205(c)(4) and would not be exempt under these circumstances.
If you have any legal questions or need help with enforcement of a judgment, please contact Attorney Scott Lanin at (212) 764-7250 x 201 or use the contact form in the right sidebar.