Sunday, June 14, 2015

Annuity Contract Purchased to Effecuate Structured Settlement Held Exempt

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Florida statute §222.14 provides that the proceeds of annuity contracts issued to citizens or residents of Florida are exempt from a beneficiary’s creditors unless the annuity was effectuated for the benefit of the creditor. §222.14, Florida Statutes. In the case of Mc Collam v. LeCroy, 612 So. 2d 572 (1993), the Florida Supreme Court held that an annuity contract awarded to the debtor by a defendant to fund a structured settlement of a personal injury case was exempt. The creditor argued that the annuity contract did not qualify as an exempt annuity contract as being in substance a nonexempt structured settlement. The court noted that the statute does not define “annuity contracts” and hence it did not find the exemption limited to any particular types of annuity contracts, such as those based on the insurance of human lives.

The court in In re Dillon, 166 B.R. 766 (Bankr. S.D. Fla. 1994) illustrated the distinction between an exempt annuity contract purchased to fund a structured settlement and a mere structured settlement. In Dillon the judgment creditor agreed to make annual payments and did not purchase an annuity contract to effectuate the annual payments. The court held that the annual payments were not exempt proceeds of an “annuity contract” pursuant to §222.14, Florida Statutes.