IRAs: Two Types

Individual retirement accounts, or IRAs, are tax-deferred savings vehicles for retirement. Under a traditional IRA, pre-tax income is deducted and placed into a retirement account. The IRA can be established by you or it can be set up by a small business. Your contribution up to a certain level is matched by the employer. The IRA can be just about any kind of investment account approved by the IRS. Upon retirement as early as 59 1/2 years of age, the account and its earnings can be distributed to the retiree, at which point the proceeds are taxed as income.

A Roth IRA works differently. After-tax income is deposited and upon retirement the money can be distributed or withdrawn with no tax liability. It is a tax-free retirement account.

Tangible Property

An IRA is tangible property. It is made up of tangle property that may include stocks, bonds, cash and the like. These assets have a value that can be easily be determined and do not meet any of the criteria laid forth by the IRS in "Publication 535: Business Expenses" that defines intangible property.

IRA, Property and Bankruptcy

An IRA is protected if its owner files for bankruptcy. Congress has protected pensions from bankruptcy and the collections of debt in the past, but never specifically addressed IRAs. In 2005, the U.S. Supreme Court ruled that IRAs counted as pensions, and are therefore protected in bankruptcy cases, because the accounts could not be distributed prior to retirement without a 10 percent penalty.

IRAs and Estates

An IRA, like other tangible property, can be distributed to heirs. Unlike a 401k retirement plan, Social Security and traditional pensions, the IRA is the property of an estate and can be divided among beneficiaries. It can also be drawn upon for distributions by survivors. By owning the IRA as opposed to assets controlled by third parities, it is easier to manage the asset after the owner dies.

IRA as Property

Generally, an early withdrawal or distribution from an IRA comes with a 10 percent tax penalty on top of income taxes owed if it is from a traditional IRA. Under a Roth IRA it is permissible to distribute contributions early but not money accrued by the account. And as your property, the money in an IRA can be withdrawn at any time despite tax penalties. Because IRAs are tangible property, it means they are your property and that you are generally allowed to dispose of them as you see fit.