Annuity Contracts VS. Bankruptcy Law in Arizona

Annuity Contracts VS Bankruptcy Law in arizona

Financial planning is difficult, but important. Many people of Arizona don’t understand the importance of saving money for the future, or the concept of financial planning. As lawyers, when we are saying “financial planning,” we are talking about long-term, the future. What are you going to do when retire? You can not just depend on social security. How about the college education of your kids? What if you want to travel the world? How long will your life savings maintain you while you are retire? There are is a lot of unforeseen situations in the future, and a variety of “what if’s.” For those who are prepare financially for the future, who have a financial plan for retirement mostly like obtain an annuity. Here is a what if situation, “What if you need to file bankruptcy, will that include losing your annuity?” My AZ Lawyers has a clarification on that “what if.”

What is an Annuity?

For those you don’t understand what an annutiy is, here is definiation from investopedia.com: “An annuity is a contractual financial product sold by financial institutions that is designed to accept and grow funds from an individual and then, upon annuitization, pay out a stream of payments to the individual at a later point in time. The period of time when an annuity is being funded and before payouts begin is referred to as the accumulation phase. Once payments commence, the contract is in the annuitization phase.” You open an annuity account with a financial institution. annuity financial growing fundsOpen the account with x amount of money, maybe with a few payments, and them leave the account alone. You’ll have to let the funds grow, accumulate. After x amount of years, depending on the contract, you’ll be receiving payouts from your annuity account. It’s like a forgotten saving account. Except this forgotten savings account is for the future, like college tuition money for your kids or to keep financially stable during retirement.

Here is scenario that builds ups to the “what if” situation. You purchase an annuity 45 years ago, and today it’s worth $200,000. These annuity is your major assets, plus you have a lot of bills and a couple for assets here and there. Now, you barely afford to pay your bills, and so there is a chance that you’ll be filing bankruptcy. Enhance, will filing bankruptcy mean losing the annuity?

Bankruptcy Law in Arizona

Luckily for you, Arizona has an exemption statute that can save your annuity contract in specific situations, A.R.S. § 33-1126(a)(7). The statute reads as follows:

“33-1126. Money benefits or proceeds; exception

A. The following property of a debtor is exempt from execution, attachment or sale on any process issued from any court: ….

7. An annuity contract where for a continuous unexpired period of two years that contract has been owned by a debtor and has named as beneficiary the debtor, the debtor’s surviving spouse, child, parent, brother or sister, or any other dependent family member, except that, subject to the statute of limitations, the amount of any premium, payment or deposit with respect to that contract is recoverable or avoidable by a creditor pursuant to title 44, chapter 8, article 1 is not exempt. The exemption provided by this paragraph does not apply to a claim for a payment of a debt of the annuitant or beneficiary that is secured by a pledge or assignment of the contract or its proceeds. For the purposes of this paragraph, “dependent” means a family member who is dependent on the debtor for not less than half support.”

Basically the specific situations are:

  1. bankruptcy law in the state of arizonaYou must the annuity contract for at least two years
  2. Must not have been broke when you bought the contract
  3. Have one of the specified person’s (surviving spouse, child, parent, brother or sister, or any other dependent family member) listed as the beneficiary
  4. **Arizona Title 44, chapter 8, article 1, relates to transfers made while broke or intentionally to defeat creditors.

These requirements are not harsh, they are very reasonable. If points one to three are met, there there is chance you’ll keep the annuity. However, if your attentions were as stated in Arizona Title 44, chapter 8, article 1, then there will be complications.

My AZ Lawyers recommended you to the properly plan your finances with the appropriate legal advice. The lawyers at My AZ Lawyers are here to help with the legal advice. We know that life is messy, and bankruptcy could be part of that mess. Understanding and being aware of the bankruptcy laws in Arizona is quite the challenge. Consult with a bankruptcy lawyer in Mesa at My AZ Lawyers to understand the regulations of bankruptcy laws.

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My AZ Lawyers

Mesa Location:
1731 West Baseline Rd., Suite #100
Mesa, AZ 85202
Office: (480) 448-9800

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Glendale, AZ 85308
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