New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

George E. Pataki
Governor

Gregory V. Serio
Superintendent

The Office of General Counsel issued the following opinion on March 26, 2003 representing the position of the New York State Insurance Department.

RE: Exemption of Annuity Proceeds from Creditors – N.Y. Ins. Law § 3212(d).

Question Presented:

Does the New York State Insurance Law exempt the proceeds of annuity contracts from creditors?

Conclusion:

Yes. There are, however, two exceptions discussed below.

Facts:

No facts were provided. The inquiry was general in nature.

Analysis:

N.Y. Ins. Law § 3212(d)(1) (McKinney 2000) provides:

(d)(1) 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.

Thus, if an annuitant has paid 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.

N.Y. Ins. Law § 3212(d)(1) (McKinney 2000) provides:

(2) 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. . . .

Accordingly, creditors may not 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."

There are, however, two exceptions to this general rule. N.Y. Ins. Law § 3212(e) (McKinney 2000) provides:

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.

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 Section 3212.

The second exception, contained in N.Y. Ins. Law § 3212(d)(2) (McKinney 2000), occurs when a court orders an:

annuitant to pay 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.

Please note that the Insurance Department bases this opinion solely on the New York State Insurance Law. The inquirer was advised to review two additional Office of General Counsel Opinions dated October 22, 2002 and April 15, 2002 which appear on the Department web site – www.ins.state.ny.us. The inquirer was also advised to consult legal counsel concerning N.Y. Ins. Law § 3212 (McKinney 2000) and any other applicable law.

For further information you may contact Supervising Attorney Joan Siegel at the New York City Office.