Life Insurance: Iron-Clad Asset Protection or Chink in the Armor?
Posted by William Byrnes on January 6, 2011
Life insurance is often touted as an iron-clad asset protection vehicle since many states exempt life insurance policies from attachment by an insured’s creditors. Life insurance can even provide limited asset protection in bankruptcy.
But life insurance is not a foolproof method of protecting family assets from all creditors, as illustrated by a recent U.S. District Court case. In that case, an insured sued his insurance company and the IRS after the insurance company paid over the cash value of a life insurance policy to the IRS to satisfy a tax levy. The insured’s wife and daughter were the beneficiaries of the life insurance policy, which would have shielded the policy from creditors in many states, including his. Read this complete article at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).
For previous coverage of asset protection in Advisor’s Journal, see Domestic Asset Protection Trusts: New Chart Ranks the States (CC 10-30).
For in-depth analysis of asset protection, see Advisor’s Main Library: G—Domestic Asset Protection Trusts.
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