Asset Protection – Investing In Annuities

There are several asset protection features in Florida that are not available in many states. Last Month I discussed your homestead, and this month I will discuss annuities. The cash value in insurance policies and all annuities are protected in the event of Bankruptcy, and creditors’ claims under Florida Statute 222.14.

Simply living in Florida does not provide such protection. Also, while the cash proceeds from annuities are protected, the proceeds should be kept in a separate account and not commingled with other non-protected assets. The drawback is that the current return on annuities will be low when interest rates are low. Therefore, a long-term strategy would be to invest in long-term annuities when interest rates are high and stay short when rates are down. Care must be taken when placing funds into exempt assets, since any movement of funds can be challenged as a fraudulent transfer, if the funds are transferred simply to avoid creditor claims. Therefore, investing part of your net worth in protected assets should be a long-term strategy.

Many individuals like to invest in qualified annuities to avoid paying current income taxes, which allows you to defer paying taxes until you receive the income. However, there are numerous types of annuities and care should be exercised to invest in the type of annuity that will meet your specific requirements.

Also, as previously discussed in Asset Protection- Florida Homestead, any exempt asset can lose its exemption under certain situations such as fraud, income tax evasion, the commission of a felony, and similar acts.

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