Is life insurance and/or annuities creditor protected?
Posted on Aug 17, 2015 5:00am PDT
Some states fully protect the cash value and death benefits from life insurance
and annuities, provided you buy them
before you incur the liability. A common protective strategy is to convert exposed
investments into exempt or protected insurance or annuity products. We
see many variations on this theme, and some are quite complex. For example,
international private placement variable universal life insurance policies
(IPPVULIs) are popular planning tools. Or you can structure private annuity
contracts to convert exposed assets into less exposed future or deferred
income streams which would be less valuable to creditors. Similarly, IRS
qualified international private placement deferred variable annuity contracts
give you tax deferral and protection, as well as greater investment flexibility.
Other planning opportunities exist with insurance-related products. And
they are worth considering if these products meet your financial objectives
beyond lawsuit-proofing. But you must ask your financial advisors about
these insurance/annuity based strategies to avoid unintended tax or other
planning pitfalls. Also consider whether these products are right for
you both from an investment and tax viewpoint.