Are Life Insurance and Annuities Creditor Protected in New York, or any other state?

 

Google that blog title statement using your state to find out.

Also search assetprotectionsociety.org

http://summitalliance.net/wp-content/uploads/2010/04/Understanding-Creditor-Protection-Within-Annuities-and-Life-Insurance.pdf

 

Florida, Hawaii and Louisiana provide full cash value exemptions.

 

Beginning in the bottom of page 3 of article link above. For New York.

New York’s scheme for the exemption of life insurance is worth noting because it clearly distinguishes between the several permutations which can result depending on whether the debtor is the owner of the policy (referred to under the New York statute as the person “effecting the policy,” and need not be the person who actually purchased the policy), the insured, the beneficiary, or some combination thereof. More specifically, the New York State exemption scheme for life insurance provides that:
1.
If the owner of a life insurance policy insures his or her own life for the benefit of another (i.e., a beneficiary other than the owner’s estate), that other person shall be entitled to the proceeds and avails of the policy as against the creditors of the owner. (In other words, the beneficiary’s interest in a life insurance policy owned by another is protected from claims of the policy owner’s creditors, notwithstanding the fact that a power to change the beneficiaries of the life insurance policy has been reserved.)
2.
If the owner of a life insurance policy insures the life of another for the owner’s own benefit, the owner is entitled to the proceeds and avails of the policy as against thecreditors of the insured. (In other words, the interest of an owner of life insurance in the policy is protected from the creditors of the insured).
3.
If the owner of a life insurance policy insures the life of his or her spouse for the owner’s own benefit, the owner is also entitled to the proceeds and avails of the policy as against
his or her own creditors. (In other words, the interest of an owner/beneficiary of life insurance in the policy is protected from the owner/beneficiary’s own creditors if the
insured is the owner’s spouse).
4.
If the owner of a life insurance policy insures the life of another person for the benefit of a third party, the third party is entitled to the proceeds and avails of the policy as against the creditors of both the owner and the insured. (In other words, the beneficiary’s interest in a life insurance policy is protected from claims of the creditors of both
the owner of the policy and the insured).
5.
The owner of a life insurance policy, regardless of the identity of the insured, is entitled to accelerated payment of the death benefit or accelerated payment of a special surrender value permitted under such policy as against the creditors of the owner. (In other words, the owner’s interest in the cash surrender value of a life insurance policy is protected from claims of the owner’s own creditors).
Even the extensive New York exemption statute does not, however, cover all possible permutations. For example, in Dellefield v. Block, a husband took out two paid-up life insurance policies on his own life with his wife as beneficiary.
Thereafter, both the husband and his wife became debtors of the same judgment creditor. Since the law in effect at that time provided that a life insurance policy insuring the owner’s own life for the benefit of another is protected from the owner’s creditors, but did not then expressly provide that the same life insurance policy is protected from the debtor beneficiary’s own creditors, the novel issue arose as to whether a joint judgment creditor could enforce its judgment against the life insurance policies. Based on a liberal interpretation of legislative intent to the effect that the statutory exemption of the debtor/owner’s interest was intended to protect all cases in which a person invested his or her own money to insure his or her own life for the benefit of another, the Dellefield court held that the life insurance policies could not be reached by the parties’ joint judgment creditor.
Other issues, of course, exist as well. For example, in the New York statute, the phrase “proceeds and avails” is defined to include “. . . death benefits, cash surrender and loan values, premiums waived, and dividends, whether used in reduction of premiums or in whatever manner used or applied, except where the debtor has, after issuance of the policy, elected to receive the dividends in cash.” Unlike New York, however, not all state statutes expressly define which incidents of value of a life insurance policy (i.e., specifically the debtor’s ability to shield the cash surrender value of a life insurance policy versus the debtor’s entitlement to the proceeds of a matured policy on the life of another) are covered by the exemption scheme at issue. Therefore, the issue may arise as to whether and to what extent the cash surrender value may be exempted when the
statute refers only to “monies paid out of a life insurance policy” or similarly ambiguous language.
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June 30, 2014 · Jennifer · No Comments
Posted in: Uncategorized

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