We all want to keep our money as safe as possible. In most cases, investors look for solutions and protections from a volatile stock market, low-interest rates, inflation, and costly expenses that are due to a long-term care need. But what if you are facing a lawsuit or a bankruptcy filing? If so, keeping assets safe from creditors with an annuity might be a viable strategy.
Property Exemption Laws and How They Work
Whether or not your money in an annuity is safe can depend on your state’s property exemption laws. There is no set law across the board, though. Rather, each of the U.S. states has the right to choose which assets its residents are allowed to protect if or when a creditor attempts to collect a debt and/or if the individual files for bankruptcy.
Typically, property that is exempt will include items that can help the person maintain his or her household and maintain income-producing employment. For instance, equity in an automobile, motorcycle, scooter, or other mode of transportation is oftentimes out-of-reach from creditors, as is a certain amount of equity in the person’s home (provided that the home is their primary residence).
Likewise, the assets that are in a tax-exempt retirement plan may also be protected from creditors…at least in some states. In order to determine which assets are exempt from bankruptcy in your state, go HERE. The federal bankruptcy code also has a list of federal exemptions that you can see HERE.
In most cases, you are required to use the exemptions that are specified by your state. Although in some instances, you may be allowed to choose whether you will use the federal or the state exemption list. (You are not allowed to combine the two, though).
Regardless of whether you opt to go with your state’s exemptions or those of the federal government, an annuity can be protected provided that it meets the requirements that are outlined in the Internal Revenue Code for qualified retirement accounts. This information can be found in the Guide to Common Qualified Plan Requirements HERE.
If the annuity does not fit with the guidelines for a qualified retirement account, there could still be another option, provided that the annuity pays “on account of illness, disability, death, age, or length of service”.
In any case, it is always a good idea to talk with an attorney in your state so that you can determine whether or not an annuity that you own is safe from creditors and/or a bankruptcy filing.
Still Have More Questions on How Annuities May Protect Assets from Bankruptcy and Creditors?
If you still have any questions about how an annuity could protect your assets in the event of a lawsuit or bankruptcy, Annuity Gator can help. We are a team of retirement income and annuity specialists, and we can walk you through all types of situations regarding annuity income, tax-advantaged growth, and even how assets could be protected when in an annuity.
So, feel free to reach out to us directly by phone at (888) 440-2468, or if you’d rather send us an email via our secure online contact form here, you can schedule a time to chat with an annuity expert at your convenience.