First off, an annuity is defined by Merriam Webster as:
a fixed amount of money that is paid to someone each year
: an insurance policy or an investment that pays someone a fixed amount of money each year
In other words, it is a very broad term that covers any number of financial planning tools.
I had a potential client contact me yesterday who had an annuity worth about $30,000. She wanted to know what would happen to it in bankruptcy. I had her scan/email me the account statement, and her “annuity” was comprised of her ex-husband’s IRA account transferred into a different IRA Accumulator account with her local credit union. It even said “Annuity” in the title of the document, but reading it more closely showed that it was a nice, simple, and very safe IRA.
Under Utah exemptions, retirement plans like IRA’s are generally protected. Utah Code 78B-5-505 exempts (or protects):
(xiv) except as provided in Subsection (1)(b), any money or other assets held for or payable to the individual as a participant or beneficiary from or an interest of the individual as a participant or beneficiary in a retirement plan or arrangement that is described in Section 401(a), 401(h), 401(k), 403(a), 403(b), 408, 408A, 409, 414(d), 414(e), or 457, Internal Revenue Code;
So in this situation, her “annuity” would be safe in bankruptcy. However, it is a complicated case-by-case analysis, and this is one that you’ll need to run by your attorney.
Basically: if it’s a retirement account like a 401k or an IRA, you should be safe.
If it’s something else, you may have a serious problem in bankruptcy.
On a side note, I spent about an hour speaking with her and researching her annuity, only to discover that she had another asset which I couldn’t protect, and which meant that she couldn’t file bankruptcy. Dang it.