Some people are confused about the protection from creditors afforded to life insurance owned by Florida residents. Florida statutes state that cash value of life insurance, in whatever form, owned by the insured is exempt from the owner’s creditors. The insurance policy in question must be owned by the same person insured by the policy. For instance, if a husband owns a life insurance policy on the life of his spouse, and the policy has accumulated significant cash value, that cash value is not exempt from the husband’s (owner’s) creditors. However, if the husband’s policy insured his own life the cash value would be protected from creditors under the subject Florida statue.
If the husband owned the policy on his own life, upon the husband’s death the death benefit would be protected from the creditors of the husband’s estate, but the death benefits paid to individual beneficiaries (spouse, children etc) would not be protected from any creditors of the beneficiaries that existed at the time of the insured’s death. Only if the policy were owned, or payable to, an irrevocable life insurance trust with spendtrift language would creditor protection continue after the death of the insured.