When I talk about an asset being “asset protected,” I mean something very specific: it’s an asset that can’t be taken from you if you get sued. Are annuities asset protected in Texas? The short answer is yes.
A Flexible Tool, Whatever You Think of It Financially
Annuities are flexible and interesting financial tools. I’m not going to weigh in on whether they’re a good investment. Some people love them and some people don’t. Some financial advisors think they’re great, and others think they’re the work of the devil. That debate is for you and your advisor.
What I can tell you is how they’re treated under Texas law. In Texas, annuities are protected if you get sued.
Why That Matters
Think about where most people keep their money: a mutual fund account, stocks and bonds, cash in the bank, real estate. If you get sued and a judgment is entered against you, money in those ordinary accounts may be taken to satisfy it.
Retirement accounts are a different story, since they have their own protections. But a regular, old-fashioned investment or savings account is exposed.
Money in an annuity is not.
It Doesn’t Matter What Kind of Annuity You Have
There are many kinds of annuities. Some pay a fixed rate. Some pay a floating rate. Some let you invest in mutual-fund-style options called sub-accounts. Whichever type you choose, the protection under Texas law applies.
The money is also still yours to use. You don’t have to wait until you die for the annuity to have value. You can take money out and spend it, or you can leave it invested and treat the annuity like a protected savings account. Texas has some of the strongest asset protection laws in the country, and annuities benefit from them.
Timing Is Everything
So are annuities asset protected in Texas? Here is the catch. The annuity has to be in place before there’s a problem. If you wait until you’ve been sued, or until you know a claim is coming, buying an annuity won’t help you. Courts look closely at transfers made to dodge creditors, and those transfers can be undone.
Asset protection is something you do in advance, as part of good planning, not as a last-minute reaction.
So get ahead of the game. Do it early. Maybe do it now. If you would like to learn more about annuities and asset protection, please visit our previous videos.
Cover Image by Kaboom Pics
This post is for general information only and isn’t legal advice. Texas annuity protections have some exceptions, including certain transfers made to avoid creditors and obligations like child support. Talk with a qualified Texas attorney about your own situation.
