In most states, life insurance contracts where a spouse or child is
the beneficiary are exempt from the claims of creditors without any
dollar limit. In a few states, the same protection is given to annuity
contracts. But, if the annuity contract is part of an ERISA qualified
plan, it will be exempt in most states. A Swiss annuity contract will
be protected from the claims of your creditors if your spouse or children
are the beneficiaries or if there is an irrevocable beneficiary. Those
are the only generalizations that I can make about the asset protection
aspects of annuity contracts and life insurance contracts. The rest
of this report elaborates on these generalizations.
Where an annuity is being paid to a named beneficiary over their life
expectancy, the cash value now belongs to the insurance company and
the insurance company has an obligation to pay the annuity income for
the lifetime of the annuitant or for some term of years. The annuitant
no longer has the power to cancel the contract and take out the cash
value. If there are any contracts that do allow the annuitant to cancel
the contract and take the remaining cash value, then that contract should
be subject to the same rules as one that is not yet converted into a
lifetime income.
Any discussion here about the transfer of the cash values of an annuity
or life insurance contract to someone else (or even to some other entity)
assumes that you are not making a fraudulent
conveyance to hinder, delay or defraud your creditors.
