A Texan with $600,000 in an IRA and an ordinary judgment against him keeps the IRA. All of it. A Minnesotan in the same spot keeps $84,000 for sure, and the rest only if a judge decides he needs it to live on.
You’d figure this is one more round of the series I started at /news/minnesota-vs-texas-wage-garnishment-571-922/, the one where Minnesota calls itself the protective state and Texas out-protects it. On the IRA, outside bankruptcy, Texas does win by a mile.
I expected to find a stingy Legislature. I didn’t. The Minnesota Legislature has tried to go Texas on retirement accounts. Twice. Both times a court threw the law out, because the Minnesota Constitution says only a “reasonable amount of property” can be exempt from creditors. Texas’s constitution doesn’t say that. One word, reasonable, is most of the difference.
And your 401(k) plays by a third set of rules that neither state writes.
What does Texas protect?
Pretty much everything with a tax deferral attached. Tex. Prop. Code § 42.0021 defines a “qualified savings plan” to include employer plans, self-employed plans, SEPs, “an individual retirement account or annuity, including an inherited individual retirement account or annuity”, and “a Roth IRA, including an inherited Roth IRA”, plus HSAs, 529 plans, and ABLE accounts. § 42.0021(a)(1)–(11). Then subsection (b) does the work:
In addition to the exemption prescribed by Section 42.001 and except as provided by this section, a person’s interest in and right to receive payments from a qualified savings plan, whether vested or not, is exempt from attachment, execution, and seizure for the satisfaction of debts.
— Tex. Prop. Code § 42.0021(b)
No dollar figure. No test of what you need. “In addition to” means it doesn’t eat into the general personal-property allowance in § 42.001 either.
It isn’t quite unlimited. Excess contributions under Internal Revenue Code § 4973, and the earnings on them, “are not exempt under this section unless otherwise exempt by law.” § 42.0021(d). An unfunded, unsecured promise by an employer to pay deferred compensation isn’t covered. § 42.0021(f). A plan loan you secured with your own account can be collected against it. § 42.0021(g). And Texas lets a child support lien reach the account. § 42.005(a). Money you take out stays exempt “for 60 days after the date of distribution”, and longer if it qualifies as a rollover. § 42.0021(e).
The Texas Constitution points the same direction. “The Legislature shall have power, and it shall be its duty, to protect by law from forced sale a certain portion of the personal property of all heads of families, and also of unmarried adults, male and female.” Tex. Const. art. XVI, § 49. Power, and a duty. Nothing in that sentence says the portion has to be reasonable.
What does Minnesota protect?
Here’s Minnesota’s version, from the 2026 edition of the statutes:
(a) The debtor’s right to receive present or future payments, or payments received by the debtor, under a stock bonus, pension, profit sharing, annuity, individual retirement account, Roth IRA, individual retirement annuity, simplified employee pension, or similar plan or contract on account of illness, disability, death, age, or length of service, to the extent of the debtor’s aggregate interest under all plans and contracts up to a present value of $84,000 and additional amounts under all the plans and contracts to the extent reasonably necessary for the support of the debtor and any spouse or dependent of the debtor.
(b) The exemptions in paragraph (a) do not apply when the debt is owed under a support order as defined in section 518A.26, subdivision 21.
— Minn. Stat. § 550.37, subd. 24
That $84,000 moves. Subdivision 4a ties the figures in § 550.37 to a federal price index and changes them on July 1 of each even-numbered year, in steps of ten percent. The Department of Commerce’s own adjustment table shows the subdivision 24 figure at $81,000 from July 1, 2024 and $84,000 from July 1, 2026. If you’ve seen $69,000 somewhere, that’s the number the Legislature wrote into the statute in 2013. 2013 Minn. Laws ch. 135, art. 2, § 15. It’s been indexed five times since.
Two things in that paragraph matter more than the number.
One cap, every account. The statute measures your “aggregate interest under all plans and contracts”, so you don’t get $84,000 per account. The Minnesota Supreme Court called that the “aggregating mechanism” and said it “disables debtors from shielding large amounts of funds from creditors by spreading retirement income over several accounts.” Clark v. Lindquist, 683 N.W.2d 784, 787–88 (Minn. 2004). Five IRAs, one cap.
What you need to live on. Everything above $84,000 comes down to a judgment call about your life. The Court of Appeals described it this way: “The reasonably necessary standard in the exemption statute requires that the court take into account other income and exempt property of the debtor, present and anticipated.” Westinghouse Credit Corp. v. J. Reiter Sales, Inc., 443 N.W.2d 837, 840 (Minn. Ct. App. 1989). The amount set aside is meant to cover basic needs, not the lifestyle you’re used to. Id. In that case, a man with $324,273.80 in other exempt retirement plans, plus two IRAs and four Keogh plans, lost a deferred-compensation account to the creditor. The court held the plan didn’t qualify at all, and as a second ground agreed with the trial court that his and his wife’s basic retirement needs would be met without it. Id. at 840–41.
So the more you’ve saved elsewhere, the less of any one account you can claim you need. The judge does that math, not you.
Why doesn’t Minnesota just copy Texas?
Because the Legislature tried, and the courts wouldn’t let it keep the change.
The constitutional sentence is short. “A reasonable amount of property shall be exempt from seizure or sale for the payment of any debt or liability. The amount of such exemption shall be determined by law.” Minn. Const. art. I, § 12.
In March 1987 the Minnesota Supreme Court read “reasonable amount” to mean reasonable value, and struck down two exemption statutes that protected fraternal-society annuities and life insurance without any limit. In re Tveten, 402 N.W.2d 551, 558 (Minn. 1987). It reached back to an 1894 decision for the rule: “The constitutional provision in question prohibits the legislature from exempting an unreasonable amount of property.” Id. at 557 (quoting the court’s own 1894 decision). And it singled out the retirement exemption as the model of doing it right. The “reasonably necessary” limit in subdivision 24 “clearly passes constitutional scrutiny because it requires a court to limit the size of the exemption based upon objective criteria.” Id. at 558.
Within about a year, the Legislature deleted that exact limit.
Try one, 1988. The amendment took effect April 12, 1988, and removed “reasonably necessary” from subdivision 24, leaving every listed account exempt without limit. A federal bankruptcy judge in Minnesota took it apart six months later. “The limitation, however, is no longer there; it is now open to a debtor, in bankruptcy or otherwise, to claim as exempt an unlimited value or amount of money held in the form of any of the accounts or entitlements described in the statute.” In re Netz, 91 B.R. 503, 505 (Bankr. D. Minn. 1988). The court held the amended statute void under art. I, § 12, and the debtors’ two annuities went to the bankruptcy estate. Id. The court had invited the Attorney General to come defend the statute. “The Attorney General has not filed a petition for intervention or otherwise appeared in this case.” Id. at 504. So much for that. The Court of Appeals later read the 1988 amendment out entirely and applied the statute as it stood before. Westinghouse, 443 N.W.2d at 839 n.1.
Try two. By 1994, subdivision 24 had two clauses. One was the cap. The other said accounts described in Internal Revenue Code sections 401(a), 403, 408, or 457 were exempt without any limit. In 1995 the Minnesota Supreme Court struck that clause too and severed it, leaving only the cap. Estate of Jones by Blume v. Kvamme, 529 N.W.2d 335 (Minn. 1995), as described in Clark, 683 N.W.2d at 786–87. Under what survived, the court said, an IRA would “only be exempt up to an indexed $30,000, plus an amount reasonably necessary for the support of the debtor and the debtor’s spouse or dependents.” Clark, 683 N.W.2d at 787 (quoting Kvamme, 529 N.W.2d at 339).
The Legislature cleaned up in 1999. Chapter 160 struck the dead clause and added Roth IRAs, under a title promising that “Roth IRAs will be treated identically to other retirement accounts”. 1999 Minn. Laws ch. 160, § 1 (signed May 13, 1999). That’s the subdivision you read above.
The Supreme Court said it plainly in 2004: “Nevertheless, to comport with the state constitution, the exemption is subject to monetary limitations.” Clark, 683 N.W.2d at 786. Tveten also said the constitution “requires some value limitation” but not necessarily “a specific value limit.” 402 N.W.2d at 558. So Minnesota could lift the $84,000 number. What it can’t do is drop the limit altogether, at least not without amending the constitution.
Your 401(k) isn’t in this fight
Here’s the part that surprises people. A 401(k) at a private employer, the kind ERISA covers, generally doesn’t live under that cap at all.
ERISA says “[e]ach pension plan shall provide that benefits provided under the plan may not be assigned or alienated.” 29 U.S.C. § 1056(d)(1). ERISA also displaces state laws that “relate to” covered plans. 29 U.S.C. § 1144(a). In 1996 the Court of Appeals held that subdivision 24 relates to those plans and is preempted as to them, quoting the Supreme Court’s line that “plans governed by ERISA will continue to be entirely exempt”. Community Bank Henderson v. Noble, 552 N.W.2d 37, 39 (Minn. Ct. App. 1996) (quoting Kvamme, 529 N.W.2d at 339). The Revisor prints a note under § 550.37 saying the same thing. I walked through Noble’s bankruptcy side at /news/minnesota-bankruptcy-exemptions-state-vs-federal/.
An IRA is a different animal. The U.S. Supreme Court noted that IRAs “are specifically excepted from ERISA’s antialienation requirement.” Patterson v. Shumate, 504 U.S. 753, 762–63 (1992); see 29 U.S.C. § 1051(6). So the IRA lands back under state law, and in Minnesota that means the cap.
Put those together and you get the trap. Clark v. Lindquist itself started with a man who left his job in 2001 and “rolled over the balance of his 401K plan” into an IRA worth about $107,500 by the time he filed. 683 N.W.2d at 785. Inside the 401(k), ERISA protected all of it. Inside the IRA, Minnesota law protected it only “as limited by the terms of subdivision 24(a) to an indexed present value and sums reasonably necessary for the support of the debtor and the debtor’s spouse or dependents.” Id. at 788. Same dollars, different wrapper, different answer. In Texas, the wrapper doesn’t matter. Both are on the § 42.0021 list.
Cashing out is worse. In Noble, a plan issued a cashier’s check that was never even cashed, and the court held the money was out of the plan the moment the check was drawn. 552 N.W.2d at 40. The debtor argued subdivision 20, which keeps exempt funds exempt after deposit if you can trace them. The court said no, because “[s]ubdivision 20 does no more than continue an exemption provided by subdivision 24.” Id. Subdivision 24 was preempted, so there was nothing to continue. Texas has a 60-day rule for exactly this moment. § 42.0021(e).
One more category. Minnesota’s big public pensions (MSRS, PERA, the Teachers Retirement Association, the judges’ fund, and others on the list) have their own statute. None of their money or benefits is subject “to execution, levy, attachment, garnishment, or other legal process”, except as the statute provides for automatic deposits and for certain divorce and support orders. Minn. Stat. § 356.401, subds. 1, 3. No dollar figure appears in it. ERISA doesn’t cover government plans at all. 29 U.S.C. § 1003(b)(1).
Does it matter where the IRA money came from?
In Minnesota, it depended on which courthouse you were standing in.
For years the federal courts here read subdivision 24, with its heading “Employee benefits”, to cover only money that came out of the debtor’s own work. The Court of Appeals had said so in 1989: “Benefits which are exempt under subdivision 24 are those derived from an employment relationship or from self-employment endeavors.” Westinghouse, 443 N.W.2d at 839. The Eighth Circuit adopted it. Deretich v. City of St. Francis, 128 F.3d 1209, 1212 (8th Cir. 1997). And the Eighth Circuit’s bankruptcy panel applied it to deny the exemption for an IRA a debtor received in his divorce, holding that if the funds “came to the debtor from a marriage dissolution decree and not from the debtor’s own employment, then they cannot be exempted under § 550.37, subd. 24”. Anderson v. Seaver (In re Anderson), 269 B.R. 27, 32 (B.A.P. 8th Cir. 2001).
In 2009 the Court of Appeals walked it back. A judgment creditor garnished a man’s IRA and Roth IRA, funded by a rollover from another IRA and by an inheritance, and argued the money wasn’t employment-related. The court held “the express language of subdivision 24(a) is void of any reference, let alone requirement, that funds be derived as a result of employment.” Russell’s Americinn, LLC v. Eagle Gen. Contractors, LLC, 772 N.W.2d 81, 84 (Minn. Ct. App. 2009). The 1989 sentence was dicta. Id. at 85. The “Employee benefits” heading wasn’t in the bill and isn’t part of the statute. Id. at 84. And the federal decisions? “These cases are neither binding nor persuasive.” Americinn, 772 N.W.2d at 85. The IRA money went back to him. Id. at 86.
That’s a published Minnesota decision on what a Minnesota statute means, and it points the other way from Anderson. I couldn’t find a later federal decision that takes it up. I searched CourtListener by case name, by citation, and alongside § 550.37, and it isn’t a complete library. If your IRA came from a divorce, I covered how that money gets divided at /news/minnesota-dividing-retirement-qdro-divorce/.
What about an IRA you inherited?
Texas answered this one in its statute, and earlier than I expected. You’ll read that Texas amended § 42.0021 to answer the U.S. Supreme Court’s 2014 decision on inherited IRAs. It didn’t. The inherited-IRA language came in with Senate Bill 1810, effective June 17, 2011, three years before that decision, and the bill says its changes “are intended to clarify rather than change existing law.” Tex. S.B. 1810, 82d Leg., R.S., § 3 (2011). Today the rule reads that an interest acquired by reason of someone’s death “is exempt to the same extent that the interest or right of the decedent was exempt on the date of the decedent’s death.” § 42.0021(c).
Then, on June 12, 2014, the Supreme Court held that inherited IRA money isn’t “retirement funds” under the federal bankruptcy exemption. Clark v. Rameker, 573 U.S. 122, 127 (2014). An heir can pull the whole balance any time without penalty, so, the Court said, nothing about the account “would prevent (or even discourage) the individual from using the entire balance of the account on a vacation home or sports car immediately after her bankruptcy proceedings are complete.” Id. at 129. That ruling governs the federal exemption. A state’s own exemption is a separate question, and Texas had already answered its own.
Minnesota hasn’t. Subdivision 24 doesn’t say “inherited”. It does say payments “on account of illness, disability, death, age, or length of service”, and Americinn tossed the rule that the money had to come from your own job. I’d argue that an inherited IRA fits the words. But I couldn’t find a Minnesota appellate decision on an inherited IRA under subdivision 24. I searched CourtListener for “inherited IRA”, “inherited individual retirement”, “beneficiary IRA”, and Rameker, each alongside § 550.37, and found none. Until a court says otherwise, an heir in Minnesota is arguing from the text, and the cap applies either way.
Then you file bankruptcy, and the state line mostly disappears
Inside a bankruptcy case, a debtor who uses Minnesota’s exemptions still gets the federal retirement-funds exemption for money in an account “exempt from taxation under section 401, 403, 408, 408A, 414, 457, or 501(a)” of the tax code. 11 U.S.C. § 522(b)(3)(C). The federal list has the same exemption. § 522(d)(12). The cap is § 522(n): traditional and Roth IRA assets, not counting rollovers from employer plans and the earnings on them, are exempt up to $1,000,000 as written, “except that such amount may be increased if the interests of justice so require.” That figure is indexed, and for cases filed on or after April 1, 2025 it’s $1,711,975. 90 Fed. Reg. 8941 (Feb. 4, 2025).
So the Minnesota cap that bites at the garnishment stage stops biting in bankruptcy. In one 2013 case out of St. Paul, a Minnesotan’s IRA annuity worth $236,370.23 was held exempt under § 522(b)(3)(C), and the bankruptcy court didn’t have to reach the subdivision 24 cap at all. Running v. Miller (In re Miller), No. 13-6026, slip op. at 2 & n.5 (B.A.P. 8th Cir. Nov. 4, 2013). An interest in an ERISA-qualified plan can be kept out of the estate entirely. Patterson, 504 U.S. at 765 (the holding “ensures that the security of a debtor’s pension benefits will be governed by ERISA, not left to the vagaries of state spendthrift trust law”). I covered the choice between the two exemption lists at /news/minnesota-bankruptcy-exemptions-state-vs-federal/, including the 730-day rule that decides which state’s exemptions you get after a move.
The one place Texas still wins inside bankruptcy is the inherited IRA. Rameker took it out of the federal retirement-funds exemption, but a Texan who uses Texas exemptions has § 42.0021(c). A Minnesotan has subdivision 24, the $84,000 cap, and an open question.
So who wins this round?
Outside bankruptcy, Texas, and it isn’t close for anyone with a big IRA. A Minnesota creditor with a judgment can garnish an IRA above $84,000 unless you prove you need it, and the garnishment side of that fight, with its notices and deadlines, is at /news/minnesota-garnishment-exemptions-judgment/. In Texas an ordinary judgment creditor doesn’t get it.
Inside bankruptcy, it’s close to a tie, except for inherited money.
For a 401(k) still sitting at a private employer, it’s a tie everywhere. Congress made that call in ERISA, and neither state gets a vote.
And Minnesota’s handicap isn’t the Legislature’s stinginess this time. It’s a sentence in the state constitution, written to protect people who owe money, that says the protection has to be reasonable. Twice, a court held the Legislature to it.
Madgett Law, LLC
Madgett Law, LLC helps Minnesotans work out what they own, how exposed each piece is to creditors, and what the exemptions Minnesota law already provides actually cover, as planning done before there’s a claim, never as a way to move assets away from a creditor who’s already at the door. Retirement accounts are usually the biggest line on that list, and whether the money sits in a 401(k), a rollover IRA, or an inherited IRA can change the answer. Read about our distressed asset protection practice, then send us a message.
Sources: Tex. Prop. Code § 42.0021(a)(1)–(12) (qualified savings plan; IRAs and Roth IRAs including inherited accounts), (b) (exemption from attachment, execution, and seizure), (c) (interest acquired by reason of death), (d) (excess contributions), (e) (60 days after distribution; rollovers), (f) (unfunded deferred compensation), (g) (plan loans); Tex. Prop. Code § 42.005(a) (child support liens) (Texas Legislative Council, Texas Constitution and Statutes); Tex. Const. art. XVI, § 49 (duty to protect a certain portion of personal property) (same); Tex. S.B. 1810, 82d Leg., R.S., §§ 1–4 (2011) (enrolled version; inherited IRA language; “clarify rather than change existing law”; effective immediately on a two-thirds vote, history note eff. June 17, 2011) (Texas Legislature Online). Minn. Const. art. I, § 12 (reasonable amount of property exempt). Minn. Stat. § 550.37 (2026), subd. 4a(a)–(b) (adjustment July 1 of even-numbered years in multiples of ten percent), subd. 20 (traceable funds), subd. 24(a)–(b) (employee benefits; $84,000 present value and amounts reasonably necessary; support-order exception), and the Revisor’s note to § 550.37 (ERISA preemption of subd. 24); Minnesota Department of Commerce, Historic Adjustments, Restrictions on Deficiency Judgments and Minnesota Property Exemption, Adjustment of Dollar Amounts (rev. June 25, 2026), row 77 (subd. 24: $81,000 eff. July 1, 2024; $84,000 eff. July 1, 2026); 2013 Minn. Laws ch. 135, art. 2, § 15 ($30,000 to $69,000); 1999 Minn. Laws ch. 160, § 1 (striking unlimited clause; adding Roth IRAs; signed May 13, 1999); Minn. Stat. § 356.401, subds. 1, 3 (exemption from process; covered public retirement plans). 29 U.S.C. § 1002(2)(A) (pension plan defined); § 1003(b)(1) (governmental plans excepted); § 1051(6) (IRAs excepted from part 2); § 1056(d)(1) (anti-alienation); § 1144(a) (preemption) (United States Code, 2024 ed., govinfo). 11 U.S.C. § 522(b)(3)(A), (b)(3)(C), (d)(12), (n) (United States Code, 2024 ed., govinfo); Judicial Conference of the United States, Adjustment of Certain Dollar Amounts Applicable to Bankruptcy Cases, 90 Fed. Reg. 8941 (Feb. 4, 2025) (§ 522(n): $1,711,975 for cases commenced on or after April 1, 2025). Clark v. Rameker, 573 U.S. 122, 127, 129 (2014); Patterson v. Shumate, 504 U.S. 753, 762–63, 765 (1992); In re Tveten, 402 N.W.2d 551, 557–58 (Minn. 1987); Estate of Jones by Blume v. Kvamme, 529 N.W.2d 335 (Minn. 1995), as quoted and described in Clark v. Lindquist, 683 N.W.2d 784, 786–87 (Minn. 2004), and Community Bank Henderson v. Noble, 552 N.W.2d 37, 39 (Minn. Ct. App. 1996); Clark v. Lindquist, 683 N.W.2d 784, 785–88 (Minn. 2004); Community Bank Henderson v. Noble, 552 N.W.2d 37, 39–40 (Minn. Ct. App. 1996); Westinghouse Credit Corp. v. J. Reiter Sales, Inc., 443 N.W.2d 837, 839 & n.1, 840–41 (Minn. Ct. App. 1989); Russell’s Americinn, LLC v. Eagle Gen. Contractors, LLC, 772 N.W.2d 81, 84–86 (Minn. Ct. App. 2009); Deretich v. City of St. Francis, 128 F.3d 1209, 1212 (8th Cir. 1997); Anderson v. Seaver (In re Anderson), 269 B.R. 27, 32 (B.A.P. 8th Cir. 2001); In re Netz, 91 B.R. 503, 504–05 (Bankr. D. Minn. 1988); Running v. Miller (In re Miller), No. 13-6026, slip op. at 2 & n.5 (B.A.P. 8th Cir. Nov. 4, 2013). This article is general information about Minnesota law, not legal advice. Reading it does not create an attorney–client relationship, and no outcome is promised or implied.