Читать книгу GOAL! The Financial Physician's Ultimate Survival Guide for the Professional Athlete - Mitch Ph.D. Levin - Страница 9

All assets are not created equal. This is proved by the fact that life insurance and annuities in many states are, by state law, specifically protected from creditors.

Like many laws, the laws protecting life insurance and annuities are rooted in public policy. The legislators in some states believe a life insurance and/or annuity benefit is essential for citizens and/or their families to maintain at least a minimum level of financial well-being and, most importantly, from becoming wards of the state.

The state’s interest to avoid paying for the indigent is tempered by a creditor’s right to collect a legal debt; but as you can understand from the government’s point of view, it is always better for someone to support themselves than for the government to dig deep into their pockets to support even more needy citizens.

State laws. Like the homestead exemption, state laws vary widely when it comes to protecting life insurance. Some states, Florida and Texas, give an unlimited exemption to life insurance policies that have cash value in them, and some states give none. South Carolina, for example, provides a limited protection for cash value in the amount of $4,000.

The death benefit in almost all jurisdictions is exempt from creditors who would be left to sue the estate of the deceased debtor. Hawaii specifically exempts the death benefit and the cash surrender value of policies provided that the policy is payable to a spouse of the insured, or to a child, parent, or other dependents of the insured.

Know whether or not your state exempts some, all, or none of the cash surrender value in your life policy, and if the state exempts the death benefit. If you live in a state where it is protected, funding a properly structured cash value life insurance policy as a wealth building will be a good way for many athletes to create a safe tax-free wealth building tool.