401k Withdrawal Still Exempt?

There is often an issue that bankruptcy attorneys must analyze as to exempt assets.  What happens to proceeds of an asset after deposited in a bank account?  For example, the proceeds of sale of a Florida homestead are still exempt if deposited in a separate bank account.  The funds must be used to buy a new homestead within a reasonable time.  Even 2 years likely reasonable.

Similarly, deposits of social security checks would be exempt.  There is also a Florida exemption for the wages of the head of household in a bank account.

What about the withdrawal of funds from a 401k or IRA?  A first thought might be that the withdrawn funds would no longer be exempt.  But a recent case that the proceeds of the 401k continue as an exempt asset even though deposited in a bank account. In re Sundstrom, 2012 Bankr Lexis 5035, (Bankr Md. Oct 26, 2012).  This court relied in part on the discussion in a Florida bankruptcy case, In re Ladd, 258 BR 824(Bankr. N. D. FL 2001)



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