SB1225: Life insurance policies and annuity contracts; proceeds and avails of policies and contracts.
Be it enacted by the General Assembly of Virginia:
1. That § 38.2-3122 of the Code of Virginia is amended and reenacted as follows:
§ 38.2-3122. Proceeds and avails of life insurance policies and annuity contracts free of certain claims.
The assignee or lawful beneficiary of an insurance policy
shall be entitled to its proceeds against any claims of the creditors or
representatives of the insured or the person effecting the policy, except in
cases of transfer with intent to defraud creditors, subject to the following
conditions:
1. The policy shall have been effected by a person on his
own life or on another life, in favor of a person other than himself;
2. The assignee of the policy, or the payee, if the policy
is otherwise made payable to another, shall not be the insured, nor the person
effecting the policy, nor the executors or administrators;
3. The right to change the beneficiary may or may not have
been reserved or permitted;
4. The policy may be payable to the person whose life is
insured if the beneficiary or assignee predeceases the insured; and
5. Subject A. As used in this section,
"protected insurance item" means, with respect to a life insurance
policy, annuity contract, or deposit with an insurance company that is
heretofore or hereafter (i) issued on or owned by a citizen or resident of the
Commonwealth or (ii) issued in or otherwise subject to the laws of the
Commonwealth:
1. The cash surrender value of any life insurance policy;
2. The proceeds of any life insurance policy;
3. The withdrawal value of any optional settlement, annuity contract, or deposit with any life insurance company; or
4. All other benefits, indemnities, payments, and privileges of every kind from any life, accident, or health insurance policy, annuity contract, or deposit with an insurance company.
B. In no case whatsoever shall any protected insurance item be liable to execution, attachment, garnishment, or other legal process in favor of any creditor of:
1. The person whose life is insured by the related policy or contract;
2. The person who is protected by that contract, deposit, indemnity, policy, or settlement, provided such person is the insured or owner of the contract, deposit, indemnity, policy, or settlement, or the spouse or intended spouse of, a dependent child of, or other person dependent on, the insured or owner of the contract, deposit, indemnity, policy, or settlement;
3. The person who can, may, or will receive the benefit of that protected insurance item, provided such person is the insured or owner of the contract, deposit, indemnity, policy, or settlement, or the spouse or intended spouse of, a dependent child of, or other person dependent on, the insured or owner of the contract, deposit, indemnity, policy, or settlement;
4. The person who owns the related contract, deposit, or policy; or
5. The person who effected the related contract, deposit, or policy.
C. The provisions of subsection B shall not apply to any claim by a creditor with respect to a life insurance policy, annuity contract, or deposit with an insurance company that was taken out, made, or assigned in writing for the benefit of the creditor.
D. Notwithstanding the provisions of subsection B and
subject to the applicable statute of limitations, the amount of any
premiums or other amounts paid for such the related life
insurance policy, annuity contract, or deposit with an insurance company
that were paid with the intent to defraud creditors, or paid under such
circumstances as to be void under § 55-81, with the interest thereon, shall
be inure to the benefit of the creditors from the proceeds of the
policy, contract, or deposit.
E. The exemption provided by this section shall not apply to any protected insurance policy, annuity contract, or deposit with an insurance company issued or effected during the six months preceding the date that the person claiming the exemption (i) files a voluntary petition in bankruptcy; (ii) becomes the subject of an order for relief or is declared insolvent in any federal or state bankruptcy or insolvency proceeding; or (iii) files a petition or answer seeking for himself any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any statute, law, or regulation.
F. The exemption established by this section shall apply to a protected insurance item regardless of whether (i) the right to change the beneficiary thereof is reserved or permitted or (ii) any of the following persons or any of their estates is a contingent beneficiary thereof:
1. The person insured by the related life insurance policy;
2. The person effecting the related life insurance policy or annuity contract;
3. The annuitant of the related annuity contract; or
4. The owner of the related life insurance policy or annuity contract.
Be it enacted by the General Assembly of Virginia:
1. That § 38.2-3122 of the Code of Virginia is amended and reenacted as follows:
§ 38.2-3122. Proceeds and avails of life insurance policies and annuity contracts free of certain claims.
The assignee or lawful beneficiary of an insurance policy
shall be entitled to its proceeds against any claims of the creditors or
representatives of the insured or the person effecting the policy, except in
cases of transfer with intent to defraud creditors, subject to the following
conditions:
1. The policy shall have been effected by a person on his
own life or on another life, in favor of a person other than himself;
2. The assignee of the policy, or the payee, if the policy
is otherwise made payable to another, shall not be the insured, nor the person
effecting the policy, nor the executors or administrators;
3. The right to change the beneficiary may or may not have
been reserved or permitted;
4. The policy may be payable to the person whose life is
insured if the beneficiary or assignee predeceases the insured; and
5. Subject A. As used in this section,
"protected insurance item" means, with respect to a life insurance
policy, annuity contract, or deposit with an insurance company that is
heretofore or hereafter (i) issued on or owned by a citizen or resident of the
Commonwealth or (ii) issued in or otherwise subject to the laws of the
Commonwealth:
1. The cash surrender value of any life insurance policy;
2. The proceeds of any life insurance policy;
3. The withdrawal value of any optional settlement, annuity contract, or deposit with any life insurance company; or
4. All other benefits, indemnities, payments, and privileges of every kind from any life, accident, or health insurance policy, annuity contract, or deposit with an insurance company.
B. In no case whatsoever shall any protected insurance item be liable to execution, attachment, garnishment, or other legal process in favor of any creditor of the spouse of, a dependent child of, or other person dependent on, the insured or the owner of the insurance policy or annuity:
1. Whose life is insured by the related policy or contract;
2. Who is protected by that contract, deposit, indemnity, policy, or settlement;
3. Who can, may, or will receive the benefit of that protected insurance item;
4. Who owns the related contract, deposit, or policy; or
5. Who effected the related contract, deposit, or policy.
C. The provisions of subsection B shall not apply to any claim by a creditor with respect to a life insurance policy, annuity contract, or deposit with an insurance company that was taken out, made, or assigned in writing for the benefit of the creditor.
D. Notwithstanding the provisions of subsection B and
subject to the applicable statute of limitations, the amount of any
premiums for such the related life insurance policy or annuity
contract that were paid with the intent to defraud creditors, or paid under
such circumstances as to be void under § 55-81, with the interest thereon,
shall be inure to the benefit of the creditors from the proceeds
of the policy or contract.
E. The exemption provided by this section shall not apply to any insurance policy or annuity contract issued during the six months preceding the date that the insured or person effecting the policy or contract (i) files a voluntary petition in bankruptcy; (ii) becomes the subject of an order for relief or is declared insolvent in any federal or state bankruptcy or insolvency proceeding; or (iii) files a petition or answer seeking for himself any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any statute, law, or regulation.
F. The exemption established by this section shall apply to a protected insurance item regardless of whether (i) the right to change the beneficiary thereof is reserved or permitted or (ii) any of the following persons or any of their estates is a contingent beneficiary thereof:
1. The person insured by the related life insurance policy;
2. The person effecting the related life insurance policy or annuity contract;
3. The annuitant of the related annuity contract; or
4. The owner of the related life insurance policy or annuity contract.
SENATE BILL NO. 1225
Be it enacted by the General Assembly of Virginia:
1. That §§ 38.2-3122, 38.2-3124, and 38.2-3125 of the Code of Virginia are amended and reenacted as follows:
§ 38.2-3122. Proceeds of life insurance policies and annuities payable to others free of claims against insured.
A. The assignee or lawful beneficiary of an insurance policy shall be entitled to its proceeds against any claims of the creditors or representatives of the insured or the person effecting the policy, except in cases of transfer with intent to defraud creditors, subject to the following conditions:
1. The policy shall have been effected by a person on his own life or on another life, in favor of a person other than himself;
2. The assignee of the policy, or the payee, if the policy is otherwise made payable to another, shall not be the insured, nor the person effecting the policy, nor the executors or administrators;
3. The right to change the beneficiary may or may not have been reserved or permitted;
4. The policy may be payable to the person whose life is insured if the beneficiary or assignee predeceases the insured; and
5. Subject to the statute of limitations, the amount of any premiums for such policy paid with the intent to defraud creditors, or paid under such circumstances as to be void under § 55-81, with the interest thereon, shall be to the benefit of the creditors from the proceeds of the policy.
B. In addition to any exemption against claims established pursuant to subsection A, any (i) proceeds payable because of the death of the insured or the person effecting the policy under a life insurance policy, (ii) cash surrender or loan value of any life insurance policy, and (iii) proceeds of an annuity contract, which sums are payable to the spouse of the insured or the person effecting the policy, or to a child, parent, or other person dependent upon the insured or the person effecting the policy, upon whatever form and whether the insured, annuitant, or other person protected thereby has the right to change the beneficiary therein or not, and whether the insured or the annuitant or the estate of either is a contingent beneficiary or not, shall in no case be liable to execution, attachment, garnishment, or other legal process in favor of any creditor of the person whose life is so insured or who is protected by said contract, or who receives or is to receive the benefit of such a contract, for any debts or liabilities incurred by the insured or annuitant on or after July 1, 2015, unless such policy, contract, or deposit was taken out, made, or assigned in writing for the benefit of such creditor. However, the exemption provided by this subsection shall not apply to any insurance policy or annuity contract issued during the six months preceding the date that the insured or person effecting the policy or contract (a) files a voluntary petition in bankruptcy; (b) becomes the subject of an order for relief or is declared insolvent in any federal or state bankruptcy or insolvency proceeding; or (c) files a petition or answer seeking for himself any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any statute, law, or regulation.
§ 38.2-3124. Protection of insurers from creditor's claims.
Notwithstanding §§ § 38.2-3122 and 38.2-3123, any insurer issuing any
insurance policy shall be discharged of all liability on that policy by payment
of its proceeds in accordance with its terms, unless before payment the insurer
receives written notice by or on behalf of a creditor of a claim, stating the
amount claimed and the nature of the claim.
§ 38.2-3125. Other rights of beneficiaries and assignees protected.
Since the purpose of §§ § 38.2-3122 and 38.2-3123 is to confer
additional rights, privileges and benefits upon beneficiaries and assignees of
policies, no beneficiary or assignee shall by reason of these sections be
divested or deprived of or prohibited from exercising or enjoying any right,
privilege or benefit that he would have or could exercise or enjoy had §§ §
38.2-3122 and 38.2-3123 not been
enacted.
2. That § 38.2-3123 of the Code of Virginia is repealed.