Retirement Accounts Are Fully Protected
Arizona offers some of the strongest retirement account protections in the country. Money held in qualified retirement plans is fully exempt from all creditor claims. This covers 401(k), 403(b), 408, 408A, traditional and Roth IRAs, and government 457 plans.
Any money or other assets payable to a participant in or beneficiary of, or any interest of any participant or beneficiary in, a retirement plan under section 401(a), 403(a), 403(b), 408, 408A or 409 or a deferred compensation plan under section 457 of the United States internal revenue code of 1986, as amended, whether the beneficiary's interest arises by inheritance, designation, appointment or otherwise, is exempt from all claims of creditors of the beneficiary or participant.
A.R.S. § 33-1126(B)There are limited exceptions. The law does not protect contributions made within 120 days before a bankruptcy filing. Courts can also divide retirement assets through qualified domestic relations orders in a divorce. But outside those narrow cases, creditors cannot touch retirement savings.
Life Insurance, Bank Accounts, and Other Protected Funds
The statute protects several other types of financial assets. A surviving spouse or child can receive up to $20,000 in life insurance proceeds free from creditor claims. Cash surrender value of life insurance policies owned for at least two years is also exempt. The beneficiary must be a family member for this rule to apply.
Every Arizona resident can protect $5,000 in a single bank account. This amount adjusts each year for inflation starting January 2024. College savings in a 529 plan are exempt too. However, the law excludes contributions made within two years of a bankruptcy filing.
Child support and spousal maintenance under a court order are fully protected. Health, accident, and disability insurance benefits are also shielded.
One rule that many people miss: if you do not claim a homestead exemption on real property, you can claim up to $2,000 in prepaid rent and security deposits instead. This gives renters a form of housing protection similar to what homeowners receive.