Using Annuities for Credit Protection
Annuities may be a smart way of investing your money. They are good savings vehicles, but may also be viewed as insurance for your retirement and love ones. Most people are buying annuities as a protection. It can be a protection from running out of money or income while you are living or when you lost your job or income. It also serves as protection from market fluctuations since many annuities have principal protection afforded to them by the insurance companies. They are also tax deferred, so there is some degree of taxation protection while the annuity is deferred.
Another reason certain individuals consider an annuity is protection from creditors. Unfortunately, this website is generic in nature, and can’t give legal advice. In certain states annuities may offer some degree of protection from creditors and lawsuits.
The lawsuits are generally state- related. It is important to know what level of protection your state provides against claimants. Some assets are protected from creditors by federal states because it considered as essential for the debtor and his family to at least support their basic needs. However, annuities are often being exempted or usually getting a limited protection since it usually serves as a substitution for retirements.
Please do individual homework based upon the state in which you live. You may also wish to consider reaching out to an attorney or other professional that may know the specific laws of your state.
Those states who give full protection still have limits so it is necessary that you seek advice and know what the limits are. They usually give protection as long as you are a legal resident of the states. However, situations are still changing. The states who are not giving protection now, might give some considerations in the future.
This article is just to let you be aware of these situations. Creditor/predator protection should not be the basis for which you make a decision to purchase an annuity. But understanding the law and how annuities are treated in your state may be helpful in evaluating your decision as to whether or not to purchase an annuity.
Please seek the advice of a professional attorney prior to purchasing an annuity if you are involved in a lawsuit to ensure this provision is applicable in your state.
Annuities are best suited for long term investors. Any withdrawal prior to age 59 ½ is subject to a 10% tax penalty as well as regular income tax. Annuities often also have a surrender schedule, meaning that withdrawals may be subject to a penalty by the insurance company if not left in for a predetermined amount of time. Any guarantees on principal invested are based upon the claims paying ability of the underlying insurance company.