Arizona

Warning: The following opinion is provided for purposes of discussion only. We have not Shepardized™ this opinion, and do not know the subsequent disposition of this case nor whether the effect of the opinion has been overruled or superceded by other law.

Section 1, Section 20-1131

20-1131. Exemption of life insurance proceeds and cash values from creditors

A. When IF a policy of life insurance is effected by any person on his THE PERSON'S own life or on another life in favor of some ANOTHER person other than himself having an insurable interest therein IN THE POLICY, or made payable by assignment, change of beneficiary or other means to a third person, the lawful beneficiary thereof or such third person, other than the person effecting the insurance or his THE PERSON'S legal representatives, shall be IS entitled to its proceeds against the creditors and representatives of the person effecting the same INSURANCE.

B. Subject to the statute of limitations, the amount of any premiums for insurance paid in fraud of creditors, with interest thereon, shall inure to their benefit from the proceeds of the policy, but the insurer issuing the policy shall be discharged of all liability thereon ON THE POLICY by payment of the proceeds in accordance with its terms, unless before payment the insurer received written notice by or in behalf of some creditor, with specification of the amount claimed, claiming to recover for certain premiums paid in fraud of creditors.

C. For the purposes of subsection A, a policy shall also be deemed to be payable to a person other than the insured if and to the extent that a facility-of-payment clause or similar clause in the policy permits the insurer to discharge its obligation after the death of the individual insured by paying the death benefits to a person as permitted by such THE clause.

D. Where IF, for a continuous, unexpired period of two years, a policy of life insurance has named as beneficiary the insured's surviving spouse, child, parent, brother, sister or any other dependent family member, then, in event of bankruptcy or in any proceeding before any court in this state, the cash surrender value of the insurance, in the proportion that the policy names any such beneficiary, shall be exempt from claims and demands of all creditors, other than a creditor to whom such THE policy has been assigned, providing such. THE exemption on all policies of life insurance relative to any debtor shall not exceed twenty-five thousand dollars except that, subject to the statute of limitations, the amount of any premiums paid in fraud of creditors, with interest thereon, shall inure to their benefit from such THE cash surrender value. For the purposes of this section SUBSECTION, "dependent" means a family member who is dependent upon ON the insured for not less than half support.

Sec. 2. Title 20, chapter 5, article 1, Arizona Revised Statutes, is amended by adding section 20-1131.01, to read:

20-1131.01. Life insurance and annuities; benefits; exemption from seizure; exceptions

A. EXCEPT AS PROVIDED BY SUBSECTION D OF THIS SECTION, THIS SECTION APPLIES TO ANY BENEFITS, INCLUDING THE CASH VALUE AND PROCEEDS OF AN INSURANCE POLICY, TO BE PROVIDED TO AN INSURED OR BENEFICIARY UNDER:

1. AN INSURANCE POLICY OR ANNUITY CONTRACT ISSUED BY A LIFE, HEALTH OR ACCIDENT INSURANCE COMPANY, INCLUDING A MUTUAL COMPANY OR FRATERNAL BENEFIT SOCIETY.

2. ANY ANNUITY OR BENEFIT PLAN USED BY AN EMPLOYER OR INDIVIDUAL.

B. NOTWITHSTANDING ANY OTHER PROVISION OF THIS TITLE EXCEPT FOR SECTION 20-1131, INSURANCE OR ANNUITY BENEFITS DESCRIBED BY SUBSECTION A OF THIS SECTION:

1. INURE EXCLUSIVELY TO THE BENEFIT OF THE PERSON FOR WHOSE USE AND BENEFIT THE INSURANCE OR ANNUITY IS DESIGNATED IN THE POLICY OR CONTRACT.

2. ARE FULLY EXEMPT FROM:

(a) GARNISHMENT, ATTACHMENT, EXECUTION OR OTHER SEIZURE.

(b) SEIZURE, APPROPRIATION OR APPLICATION BY ANY LEGAL OR EQUITABLE PROCESS OR BY OPERATION OF LAW TO PAY A DEBT OR OTHER LIABILITY OF AN INSURED OR OF A BENEFICIARY, EITHER BEFORE OR AFTER THE BENEFITS ARE PROVIDED.

C. THE EXEMPTIONS PROVIDED BY SUBSECTION B OF THIS SECTION APPLY REGARDLESS OF WHETHER:

1. THE POWER TO CHANGE THE BENEFICIARY IS RESERVED TO THE INSURED.

2. THE INSURED OR THE INSURED'S ESTATE IS A CONTINGENT BENEFICIARY.

D. THE EXEMPTIONS PROVIDED BY SUBSECTION B OF THIS SECTION DO NOT APPLY TO:

1. A PREMIUM PAYMENT MADE IN FRAUD OF A CREDITOR, SUBJECT TO THE APPLICABLE STATUTE OF LIMITATIONS FOR RECOVERING THE PAYMENT.

2. A DEBT OF THE INSURED OR BENEFICIARY THAT IS SECURED BY A PLEDGE OF THE CASH VALUE OF AN INSURANCE POLICY OR THE PROCEEDS OF THE POLICY.

APPROVED BY THE GOVERNOR MAY 6, 2004.

FILED IN THE OFFICE OF THE SECRETARY OF STATE MAY 6, 2004.

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