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Are Annuities Protected from Creditors?

Find out how to protect assets using annuities. Keep your retirement nest egg safe from lawsuits, bill collectors and judgments. Bankruptcy is okay.

Asset protection is a valid concern for everyone in difficult economic times. Traditionally, homes provide the greatest degree of protection because of the homestead exemption. Additionally, pensions and qualified retirement accounts provide sturdy insulation from creditor attacks. Today, you should add annuities to you list for consideration. They provide a safe haven for your retirement accounts while the real estate market remains volatile.

Annuities and Exemptions

State law determines property exemptions in most situations. Bankruptcy is the prime exception, which allows debtors to elect either federal or state property exemptions in a few jurisdictions. As the popularity of investing in annuities grew, state legislators began addressing the extent of the exemption permitted for these popular investments.

State Variations

Each state’s laws are different. In a few jurisdictions, principal, income, and future payments are exempt from creditor actions. Most jurisdictions however limit the amount of the exemption to a set dollar amount. Additionally, future payments may remain exempt in some circumstances so long as the beneficiary did not fund the contract. If you have questions regarding your state laws, contact a local attorney. Structuring contracts for compliance with state law is a critical aspect of asset protection.

Unlimited Options

You may tie the investment return of annuities to a variety of sources. Fixed rates are available similar to certificates of deposit. Variable rates frequently tie income to mutual fund performance. Index rates fluctuate in harmony with major stock, bond and financial indexes in the United States. Funds are available that specialize in real estate appreciation. The amount of risk you choose and the size of your original contribution determines the amount of your future payments. Choose wisely, and collect benefits for a lifetime.

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