The cash value and proceeds from a Florida annuity are exempt under Florida law. Annuities have a long history, dating back to the Roman Empire. Put simply, an annuity is a sum of money payable yearly or at other regular intervals. When used appropriately, an annuity is a powerful tool in an individual’s asset protection plan.
In Florida, an annuity may serve several important functions:
- Asset Protection
- Guaranteed Income
- Tax-Deferred Growth
Florida law specifically exempts annuities from collection by a judgment creditors. Section 222.14 of the Florida statutes states:
Exemption of cash surrender value of life insurance policies and annuity contracts from legal process.—The cash surrender values of life insurance policies issued upon the lives of citizens or residents of the state and the proceeds of annuity contracts issued to citizens or residents of the state, upon whatever form, shall not in any case be liable to attachment, garnishment or legal process in favor of any creditor of the person whose life is so insured or of any creditor of the person who is the beneficiary of such annuity contract, unless the insurance policy or annuity contract was effected for the benefit of such creditor.
The annuity proceeds are protected even after deposited into a bank account so long as the funds in the account can be traced to the annuity.
Just as annuities provide asset protection, they also provide valuable protection against one of the greatest fears of retiree’s: ‘Longevity Risk,’ the risk of outliving assets. Annuities provide a strategy that guarantee a lifetime income stream regardless of how long you live. With the number of pension plans on the decline, annuities have taken their place in a sound retirement strategy for a portion of savings as a reliable source of income.
One of the main advantages of all annuities is their tax-deferred feature, which allows an annuity owner to accumulate more money in a compounding fashion, as opposed to fully-taxed investments. This feature can also be used within a trust, which are subject to high tax rates above a low threshold of income that is not distributed. This is why annuities are often used for tax-advantaged legacy planning.
In addition, annuities commonly have a ‘death benefit’ which provides the original principal, less withdrawals, to the beneficiaries, regardless of the underlying fund performance.
The Florida Life & Health Insurance Guaranty Association protects an annuity owner in the unlikely event that the insurance company is insolvent. Currently, the maximum amount of protection provided by FLAHIGA for any one person is:
- Annuity Cash Surrender: $250,000 for deferred annuity contracts per contract owner.
- Annuity in Benefit: $300,000 per contract owner.
It can be particularly advantageous for Florida judgment debtors to use a Florida-based investment firm to better ensure that the annuity asset is located in Florida. For example, many of our clients have had success with FDR Financial Group, who are based in Hollywood, FL, but serve clients throughout the state.
What to Do Next
We help people go through their assets and income and determine what is at risk of collection from a judgment creditor. We then develop a plan to protect any exposed assets from collection. If you’re interested in protecting your assets from monetary judgment creditors, contact us or schedule an appointment online.
Last updated on May 31, 2020
if annuity purchased in New York and I move to Florida is it under New York or Florida rules
Which state law applies is a complicated question, but one important thing is to look at the annuity contract itself to see if it indicates a location.