The Office of General Counsel issued the following opinion on November 10, 2003 representing the position of the New York State Insurance Department.
Re: Attachment of Annuities
Question Presented
Are the proceeds of an annuity protected from creditors?
Conclusion
Generally, the proceeds of an annuity are protected from creditors but there are exceptions.
Facts
The inquirers client has an annuity. The inquirers client is involved in a lawsuit and is concerned that, if the inquirers client loses the case, the annuity will be available to satisfy the judgment.
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 may wish to review two additional Office of General Counsel Opinions dated October 22, 2002 and April 15, 2002 (copies enclosed), which appear on the Department web site www.ins.state.ny.us. It is also advised that the inquirer consult legal counsel concerning N.Y. Ins. Law § 3212 (McKinney 2000) and any other applicable law.
For further information one may contact Supervising Attorney Joan Siegel at the New York City Office.