Creditor's rights under private annuities and grantor-retained annuity trusts in Florida.

• Author: Gassman, Alan S.

The second part of a recent two-part Florida Bar Journal article titled "Unraveling the Mysteries of the Florida Exemptions for Life Insurance and Annuity Contracts, Part Two" discusses the creditor protection elements of annuity contracts. (1) The article discusses inter alia the exemption granted by F.S. [section]222.14. Under this statute, the proceeds of an annuity contract issued to a Florida resident are statutorily exempt from the beneficiary's creditors. (2)

The article reaches the conclusion that a private annuity arrangement should not qualify for protection under the Florida statute as an exempt asset because the legislature did not intend to protect private contracts. (3) The authors respectfully disagree with this perspective in light of the analysis and authority cited below, which includes general rules of statutory construction and the bankruptcy decision in In re Mart, 88 B.R. 436 (S.D. Fla. 1988), which specifically held that a private annuity contract entered into between a debtor and a trust established by the debtor was a protected annuity under F.S. [section]222.14.

Statutory Construction

The article refers to legislative history and concludes that the legislature intended only to provide protection for commercial annuities, because commercial annuities were apparently mentioned in the legislative history. If the legislature considered private annuities during its legislative sessions but did not address them in the statute, then the failure to omit them from the final version of the statute that was enacted would be a clear acknowledgment that they fall within the purview of the statute. A reference to commercial annuities in the legislative history, without more, is hardly sufficient to change the clear meaning of a statute.

On the other hand, if the legislature did not contemplate private annuities when passing this legislation, then one could posit that they would still be protected, because the statute provides protection for all annuities without limiting the types of annuities protected. Put another way, it would take a legislative clarification to modify the clear language of the statute, which is quite expansive in its literal scope, as it refers to annuity contracts "upon whatever form."

This statutory construction argument is supported by established concepts of judicial construction. In the 1989 case of U.S. v. Ron Pair Enterprises, Inc., 489 U.S. 235 (U.S. 1989), the U.S. Supreme Court found that the interpretation of a statute should be based upon the wording thereof, unless the clear intent of the legislature is other than as set forth in the statute. (4) If the language of a statute is plain, courts must enforce the statute according to its clear and unambiguous terms. (5)

Furthermore, the law is well-settled that creditor exemptions are to be construed liberally in favor of providing the benefits of the exemptions to debtors. (6) In In re Mart, the court stated that "there is no basis in this statute to restrict the exemption to annuities provided by completely unrelated, public entities." (7) In LeCroy v. McCollam, 612 So. 2d 572 (Fla. 1993), the Florida Supreme Court noted that the statute does not limit the exemption to any particular type of annuity contract. "This holding suggests that even 'private' arrangements not involving 'commercial' annuities will qualify for the exemption." (8)

To limit F.S. [section]222.14 so that it does not apply to private annuities is to create a distinction that does not exist in the statute, and would be tantamount to rewording the statute by changing the references to "annuity...