Annuities Owned By Business Entities

Jon Alper Business Asset Protection

A Florida resident owns an LLC with in turn owns real estate. The LLC sells the real estate and receives substantial case proceeds. The owner wants to purchase an annuity with some of the sales proceeds because of the investment features and because he heard annuities are protected from creditors. The LLC owner would be the annuitant and beneficiary. Does it make any difference if the LLC distributes the sales proceeds to the owner who in turn buys the annuity versus having the LLC buying the annuity directly and naming the owner as the beneficiary. Lets look at the applicable statute.

Florida Statute 222.14 protects the proceeds of annuities issued to citizens or residents of Floirda against execution by a creditor of the annuity beneficiary. If the LLC purchases the annuity the annuity would not have been issued to a citizen or resident of Florida. The LLC owner’s beneficial interest in the annuity and its proceeds may not be protected by the statute if the annuity is being issued to the LLC.

It appears that the LLC’s transfer of ownership of the annuity to the individual would resolve the issue because the statute make no reference to “ownership” of the annuity, only to whom the annuity was issued. Many annuities are issued to IRAs as part of retirement planning, and I have not heard anyone challenge their exempt status. However, IRA’s are essentially self-settled trusts for the benefit of the taxpayer and for tax purposes at least do not have a legal identity independent of their owners.

I don’t know if there are any court decisions addressing this issue. I think it is safer to have annuities issued to persons rather than their business entities.

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