There have been numerous studies concerning the tax impact of insurance products and the tax efficiency of insurance as demonstrated is truly remarkable. However, there are other aspects of insurance that are particularly interesting. An aspect often mentioned but perhaps insufficiently explained is the advantage of insurance from an asset protection perspective. The best place to start from the point of view of analysis is, of course, one’s home ground. In the State of Florida, residents of the State of Florida enjoy specific statutory asset protection with respect to life insurance policies and annuities. Specifically, the cash surrender value of any life insurance policy or annuity owned by a resident of the State of Florida is exempt from the claims of creditors of that resident under Florida law. Likewise, the proceeds of life insurance on the life of a Florida resident is exempt by statute from the claims of the resident’s creditors as well as the creditors of his estate. The State of New York offers a similar exemption.
In certain other states, while there is an exemption available for products, there is a dollar limitation which is normally quite small. Moreover, the exemptions available differ between life insurance policies and annuities. As we shall see, the exemptions available in certain foreign jurisdictions are much more generous.
It should be noted that the exemption offered by the State of Florida has several limitations attached to it. First of all, the exemption is available only to residents of the State of Florida and only under Florida law. A policy of life insurance or an annuity issued by a Florida-based company to a non-Florida resident is not exempt under Florida law. The ownership of that property may or may not be exempt depending upon the laws in the owner’s domicile. Moreover, the extent to which the exemption will be honored outside of the State of Florida in the courts of other states is not entirely clear.
Consider the example of a Florida insured covered by a life insurance policy issued by an insurer in a state without a statutory exemption. While on vacation in the other state, the Florida resident is involved in an automobile accident and the claim exceeds his automobile insurance coverage. Suit is brought against him in the other state, and judgment is entered against him personally. In supplementary discovery of his assets, the existence of the policy is disclosed. The judgment creditor seeks to attach the policy. The Florida judgment debtor defends on the grounds of the Florida exemption. On the other hand, the policy is, after all, issued by an insurer domiciled in the other State, where the judgment was entered. Research has thus far yielded no definitive answer as to what the result would be under these circumstances.
[Open Pages:] [Library] [Links] [Meetings] [Portfolio List] [Preview] [Publications] [Summ & Trans] [Yellow Pages]
[Members Pages:] [Member Search] [Portfolio of Laws] [Summ & Transcripts] [Yearbook]