The Office of General Counsel issued the following informal opinion on October 22, 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)

Question Presented:

Is the owner of a non-qualified commercial individual annuity protected from creditors?


Yes; under N.Y. Ins. Law § 3212(d) (McKinney 2000) the proceeds of an annuity contract are, to the extent specified therein, protected from creditors.


No specific facts were provided. However, the inquirer referred to a particular annuity as a "non-qualified commercial individual annuity," and the inquirer was concerned with the kind of creditor protection issues that arise from divorce, bankruptcy, and creditors in general.


N.Y. Ins. Law § 3212 (McKinney 2000) exempts, under certain circumstances, the proceeds of certain insurance and annuity contracts from the claims of creditors. Subsection (a) of the statute contains definitions of terms for purposes of the statute. Paragraph (2), (3) and (4) provide, as follows:

(2) An annuity contract includes any obligation to pay certain sums at stated times, during life or lives, or for a specified term or terms, issued for a valuable consideration regardless of whether such sums are payable to one or more persons, jointly or otherwise, but does not include payments under a life insurance policy at stated times during life or lives, or for a specified term or terms.

(3) The term ‘creditor’ includes every claimant under a legal obligation contracted or incurred after December thirty-first, nineteen hundred thirty-nine.

(4) The term ‘execution’ includes execution by garnishee process and every action, proceeding or process whereby assets of a debtor may be subjected to the claims of creditors.

The inquirer’s reference to a "non-qualified commercial individual annuity" is not a familiar term, other than the fact that "non-qualified" refers to an annuity that is not tax sheltered. For purposes of this response only, it is assumed that the referenced type of annuity constitutes an annuity contract within the meaning of the statute as quoted above.

Subsection (d) of § 3212 enumerates the creditor exceptions applicable to annuity contracts, as follows:

(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.

(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, except as provided in subsection (e) hereof [transfers made with the intent to hinder, delay or defraud creditors] and except that the court may order the 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.

(3) The benefits, right, privileges or options accruing under such contract to a beneficiary or assignee shall not be transferable nor subject to commutation. If the benefits are payable periodically or at stated times, the same exemptions and exceptions contained herein for the annuitant shall apply with respect to such beneficiary or assignee.

As to annuity contracts, the statute provides for three different exemptions. First, there is an exemption from execution for benefits, rights, privileges and options due the annuitant under an annuity contract. Please note that the statutory exemption contained in (d)(1) applies to benefits, rights, privileges and options that are due or prospectively due, so that its protection is applicable before and after payouts are made under the annuity contract. Second, the annuitant is exempted from being compelled to exercise rights, powers or options in an annuity contract, nor can creditors interfere with or terminate the contract (except as to transfers with intent to hinder, delay or defraud creditors and payments required to creditors under a court order). Third, benefits, rights, privileges or options to a beneficiary or assignee are neither transferable nor commutable. Furthermore, if benefits under the annuity contract are payable periodically, or at stated times, the statutory exemptions provided for in paragraphs (1), (2) and (3) that apply to the annuitant also apply as to the beneficiary or assignee.

The foregoing opinion is based solely upon the New York State Insurance Law. The statute cited herein has been subject to judicial interpretation by various courts of law and such decisions should be taken into consideration when a specific factual situation is presented.

For further information you may contact Associate Attorney Barbara A. Kluger at the New York City Office.