Vanguard Variable Annuity - Bankruptcy Implications?

[Craig]

We may indeed go into business in Vermont.

We're long in the tooth for this current prosperity, and we see Mr. Greenspan feels the same ... who knows ... not sure Alan is any better than me at predicting tops.

Lots of due diligence to do, and this will involve significant investment, including about $2M+ in personally-guranteed debt, plus a long term lease. There is real risk, but I believe it is manageable. Upside is very attractive, and I can apply business principles I've learned over decades. Plus help a good team grow in the business.


Question ... we have a small amount in Vanguard and Fideility variable annuities. If all goes south, and we were forced to declare personal bankruptcy down the road, could those annuities be protected? Does that protection require that they be annuitized first? State law specific? Any Vermont attorneys out there? Other suggestions? [I will always be honest with our creditors, but a little planning up front is appropriate.]

Thanks.

 

[Cut-Throat]

How does this square with your avatar?

 

[cute fuzzy bunny]

We're long in the tooth for this current prosperity, and we see Mr. Greenspan feels the same ... who knows ... not sure Alan is any better than me at predicting tops.

He used to be able to make his own peaks and valleys. Without a hand on the wheel, it might be a little harder.

 

[Martha]

State law specific. Some states exempt an annuity if it was established for retirement purposes but the exemption is often limited to the amount necessary for support for yourself and dependents. Or the exemption may be limited to a certain dollar amount. A few states broadly exempt annuities, Florida for one.

Here is a link to a summary of Vermont exemptions: http://www.bankruptcyinformation.com/VT_exemp.htm

The list isn't detailed so you would need to find out more about the $350 a month annuity exemption. If you want to read the statute itself, you can search on www.findlaw.com.

It appears that Vermont lets you take the federal bankruptcy exemptions in lieu of the state exemptions. Under section 522 of the bankruptcy code there is a limited exemtion for annuities, which judges interpret in a variety of ways:

[10) The debtor's right to receive -
(A) a social security benefit, unemployment compensation, or a local public assistance benefit;
(B) a veterans' benefit;
(C) a disability, illness, or unemployment benefit;
(D) alimony, support, or separate maintenance, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor;
(E) a payment under a stock bonus, pension, profitsharing, annuity , or similar plan or contract on account of illness, disability, death, age, or length of service, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor, unless -
(i) such plan or contract was established by or under the
auspices of an insider that employed the debtor at the time the debtor's rights under such plan or contract arose;
(ii) such payment is on account of age or length of
service; and
(iii) such plan or contract does not qualify under section
401(a), 403(a), 403(b), or 408 of the Internal Revenue Code of 1986.

 

[Craig]

Cut-Throat ... actually, it squares perfectly with my avatar ... can tell you more if / when we do the deal.


Martha, that is wonderfully helpful ... thank you.