Two clients had the same question last week about purchasing annuities. Both client were planning to move to Florida from another state where judgments were about to be entered against them. They are interested in buying annuities which are exempt under Florida law. They want to know if their annuities would be exempt in Florida if they are purchased while resident of another state.
Florida statutes do not require that a debtor be a resident of Florida when he becomes the owner or beneficiary of an annuity contract in order to have the annuity proceeds exempt from creditors. Many Florida debtors have successfully protected annuities purchased from national insurance companies before the debtors become Florida residents.
There might be an issue if the annuity were issued by a small financial firm, or a private individual, located in another state that did not fully exempt the annuity. A creditor might try to execute on the annuity in the local state where the annuity was issued. I believe the exemption still applies regardless of where the annuity was issued. The vast majority of annuities are issued by large, national financial firms doing business in every state. I told both clients that they would not jeopardize their exemption under Florida law if they purchased their annuity from an insurance company prior to becoming a Florida resident.
There is a possibility that buying the annuity while residing in another state that does not fully exempt annuities strengthens the protection after moving to Florida. The purchase in the other state could deflect fraudulent conversion arguments. If the debtor purchases an annuity in a state that does not fully exempt the annuity, the debtor has not engaged in a potentially fraudulent conversion because the has not changed a non-exempt asset (cash) to an exempted asset under the laws of the other state. The exemption is acquired, not by the conversion, but by the subsequent relocation to Florida. There is no legal remedy against a “fraudulent move” to another state.
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