Are Annuities and Life Insurance Policies Exempt from the Claims of Creditors in Florida?

Annuities are a common tool for investment, financial and estate planning and asset protection.  An annuity is simply a contract between a person and an insurance company in which the person makes a lump sum payment to the insurance company in exchange for regular disbursements of money that start either immediately or at some definite time in the future.    At its core, an annuity is really a form of investment or insurance that entitles the investor to a series of annual payments.

Closely related to annuities are life insurance policies.   Like annuities, life insurance policies are contracts of insurance but, unlike annuities, life insurance is specifically intended to pay death benefits to designated beneficiaries.   The policyholder pays premiums to an insurance company which issues a life insurance policy guaranteeing payment of the purchased death benefit to the named beneficiaries once the insured passes away.

Since I have long represented persons and companies with respect to debt collection and judgment enforcement, I have been asked numerous times through the years whether a judgment creditor, i.e., one who has a monetary judgment in her favor against someone, can collect on that judgment from either an annuity or the cash surrender or proceeds of a life insurance policy purchased by the judgment debtor.  The answer, at least in Florida, is a pretty emphatic “no.”

Florida Statutes Sec. 222.13(1) provides:

(1) Whenever any person residing in the state shall die leaving insurance on his or her life, the said insurance shall inure exclusively to the benefit of the person for whose use and benefit such insurance is designated in the policy, and the proceeds thereof shall be exempt from the claims of creditors of the insured unless the insurance policy or a valid assignment thereof provides otherwise. Notwithstanding the foregoing, whenever the insurance, by designation or otherwise, is payable to the insured or to the insured’s estate or to his or her executors, administrators, or assigns, the insurance proceeds shall become a part of the insured’s estate for all purposes and shall be administered by the personal representative of the estate of the insured in accordance with the probate laws of the state in like manner as other assets of the insured’s.

Similarly, Florida Statutes Sec. 222.14 states

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 above law is very clear.  Someone holding a judgment that remains outstanding must look to sources other than annuities or the cash surrender or proceeds of life insurance policies—unless the life insurance policy specifically provides otherwise—in order to enforce that judgment.