Life Insurance Policies Exempt in Bankruptcy?
What happens to your life insurance policy in the evenot of a bankruptcy?i have a question about exemption of unmatured life insurance: this is a voluntary, single individual, #7, no asset case. California Code of Civil Proceedure states: 704.100. (a) Unmatured life insurance policies (including endowment and annuity policies), but not the loan value of such policies, are exempt without making a claim. (b) The aggregate loan value of unmatured life insurance policies (including endowment and annuity policies) is subject to the enforcement of a money judgment but is exempt in the amount of eight thousand dollars ($8,000). my mother took out an "accidental death and dismemberment" policy many years ago on which my brother and i are the beneficiaries. the policy value is $81,000. my mom will still be around for several years (knock on wood). this is the only investment that exists in my name. can someone tell me what the paragraph above means for me? if i file now, will there be any future affects when the policy matures? do i have to claim the "loan value" of this policy on schedule C?
Answer:
Assuming that the policy has no cash value, it is worthless to the trustee, and can be kept. Granted, that the *result* implied by Mr. Weiss' response is probably accurate -- i.e., that the policy's continued existence in effect would not adversely affect the beneficiary if while his mother is still alive the beneficiary opts to petition for bankruptcy relief -- but how does what he implies as the reasoning for that reponse apply to the (contingent) beneficiary as debtor and would-be bankrputcy petitioner? The policy, as the OP seems to describe/characterize it, appears to be an asset of his mother, not of his. (He doesn't say he presently owns the policy.) Yet doesn't the statute to which he refers apply not to him as debtor but, rather, to an asset of his mother if she were a judgment-debtor whose judgment-creditor(s) were seeking to enforce a judgment against her interest (to the extent there is any worth more than $8,000) in the policy?
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