Unlike Texas and Florida, Life Insurance is not exempt in most states, and only has a $13,975 creditor exemption in California. So, like liquid accounts that can be confiscated by unwanted creditors, our clients get visually upset about the thought of losing the tax-efficient cash values and death benefits intended for their family and other beneficiaries.

An interesting fact is that 85% of all life insurance is purchased for retirement supplemental planning. By virtue of this objective, life insurance can be exempt if owned by a Private Retirement Plan. Under California law:

  • All policy cash values in a private retirement plan are exempt.
  • All plan and policy distributions are exempt:
    • (READ THIS CAREFULLY: even after distributions by a Private Retirement Plan, those values are exempt from creditor seizure. But this must be properly administrated to ensure that one does not forfeit such protections).
  • All death benefits are exempt.

So why would anyone buy a life insurance in their personal or business name and be exposed to both personal and business creditors and destroy their legacy plan?

They shouldn’t, when instead they can ensure to protect and secure tax-efficient benefits to their loved ones for a more comfortable retirement lifestyle.



Resource: PRIVATE RETIREMENT LIFE℠ - Advisor Overview




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