The Office of General Counsel issued the following informal opinion on April 15, 2002, representing the position of the New York State Insurance Department.
Re: Exemption of Annuity Contract Proceeds from Creditors N.Y. Ins. Law § 3212(d).
Does New York State Insurance Law exempt the proceeds of annuity contracts from creditors?
Yes. There are, however, two exceptions please see analysis below.
No facts are provided.
"The benefits, rights, privileges and options which, under any annuity contract are due or prospectively due the annuitant, who paid the consideration for the annuity contract, shall not be subject to execution." N.Y. Ins. Law § 3212(d)(1) (McKinney 2000). Therefore, if an annuitant has paid the consideration for an annuity contract, a creditor may not execute the benefits, rights, privileges or options due, or prospectively due, to the annuitant under the annuity contract. Id.
"The annuitant shall not be compelled to exercise any such rights, powers or options contained in the annuity contract, nor shall creditors be allowed to interfere with or terminate the contract." Id. § 3212(d)(2). Creditors may not, therefore, compel an annuitant "to exercise any such rights, powers or options contained in the annuity contract, nor shall creditors be allowed to interfere with or terminate the contract." Id.
There are, however, two exceptions within § 3212.
Every assignment or change of beneficiary or other transfer is valid, except in cases of transfer with actual intent to hinder, delay or defraud creditors, as defined by article ten of the debtor and creditor law. In such cases creditors shall have all the remedies provided by such article ten.
Id. § 3212 (e)(1).
Thus, the assignment, change of beneficiary or other transfer by the annuitant, with the actual intent to hinder, delay or defraud creditors will forfeit the exemption status provided by § 3212. Id. § 3212(e)(1). The second exception occurs when a court orders an:
annuitant to pay to a judgment creditor or apply on the judgment in installments, a portion of such benefits that appears just and proper to the court, with due regard for the reasonable requirements of the judgment debtor and his family, if dependent upon him, as well as any payments required to be made by the annuitant to other creditors under prior court orders.
Id. § 3212(d)(2).
Please be advised that the Insurance Department bases this opinion solely on the New York State Insurance Law. It is advised that you consult your companys legal counsel concerning N.Y. Ins. Law § 3212 (McKinney 2000) and any other applicable law.
For further information you may contact Attorney Kristian Earl Lynch at the New York City Office.