Posted on June 9, 2009 at 9:52 pm Can somebody explain how these work?  Can annuities be not part of a consumer's bankruptcy estate? Thanks!

Posted on June 9, 2009 at 9:56 pm A lawyer would be better at answering those, but I read somewhere that it depends on the state law and the nature of annuities contract. Apparently, if a consumer's annuities do not qualify as trusts, they are going to be included in the bankruptcy estate.

Posted on June 9, 2009 at 10:14 pm I agree with Peterpanamerican regarding this issue-- bankruptcy and annuities are a state per state-contract per contract basis, like for example :if the terms of the consumer's plan state that the benefits would be protected from the claims of creditors to the "fullest extent permissible by law" then it should be exempt from the bankruptcy estate. What if the creditor argues that it is part of the bankruptcy estate, as per Section 541(c)(2), which states that the annuity's restriction on creditors' access to the account was not unenforceable because it did not qualify as a "trust." It would now depend on the state law. For example if in the state that the consumer is in, has a law that says something like "an employer-mandated retirement plan such as this one constitutes a trust," then the consumer wins.Again, I'm not a lawyer, If you have a case such as this one, might as well see a qualified expert. Hope that helps.

Posted on June 9, 2009 at 10:32 pm If you're wondering why the trustee and the creditors insist that annuities are part of the bankruptcy estate, it is because annuities are "investments" and are non-government insurance types (if they are neither ERISA-qualified plans or pension plans), and they fall under the "property that you are entitled (about to) to receive," which in a bankruptcy case, is considered part of the estate.

Posted on June 9, 2009 at 10:50 pm Thank you for the replies! Would you know though what constitutes "trusts?"

Posted on June 9, 2009 at 11:16 pm It really depends on the documents. If the papers were referred to as  "contract" and not as  "trust"--and the insurance company, from which it was bought, were not referred to or did not assume to be "the trustees" then it is not a trust. I really am not sure.

Posted on June 9, 2009 at 11:59 pm I am not a lawyer but Under 11 U.S.C. 541(c)(2) to qualify for a exclusion: 1) the debtor must show that the asset represents the debtor's beneficial interest in a trust, especially if the debtor is either very old or disabled. Ultimately, it depends on the case and how the district court would rule on the evidence, but I think that the judge would look for "intent" or a manifestation of intention to create a trust between the debtor and the "trustee."