On July 26, 2016, the United States Court of Appeals for the Seventh Circuit broadly affirmed a Wisconsin statute that makes annuities exempt from a creditor’s judgment.  The case – – Whitman, Trustee in Bankruptcy v. Koenig, 2016 WL 3997251 – – was argued earlier this year and the Appeals Court issued its decision on July 26.

Wisconsin Stat. §815.18(3)(j) 2.a exempts a debtor’s annuity contract that “complies with the provisions of the Internal Revenue Code.”  The Bankruptcy Trustee argued for a very narrow construction of the statute.  But the U.S. Seventh Circuit Court of Appeals interpreted it more broadly.  The Court noted that the statute in question required it to construe the exemption to “secure its full benefit to the debtors.”

This very recent court decision is a good reminder that an annuity can be an effective asset protection alternative in many states.  The degree of protection will vary from state to state – – as is the case with many other asset protection considerations.  Purchasing an annuity involves a number of significant financial considerations (and there are many different kinds of annuities).  But when considering an overall asset protection strategy, purchasing an annuity may, in a variety of circumstances, prove to be a useful alternative.