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.Questions and Answers on Florida Revocable Life Insurance Trust:

Q: Is a Life Insurance Policy Subject to Your Creditors?

A: Normally no, under Florida Statute 222.13(1) Whenever any person residing in the state shall die leaving insurance on his or her life, the said insurance shall inure exclusively to the benefit of the person for whose use and benefit such insurance is designated in the policy, and the proceeds thereof shall be exempt from the claims of creditors of the insured unless the insurance policy or a valid assignment thereof provides otherwise.


However, if you leave your Life Insurance to a Revocable Living Trust, a recent Florida Case says that you are opening the liability up to creditors, because a revocable living trust is subject to creditors. 

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Florida Revocable Life Insurance Trust

A life insurance policy exists to provide financial support for your family after you die. To prevent life insurance proceeds from passing through probate, you may set up a revocable life insurance trust. While these trusts can keep life insurance proceeds out of probate court, they also come with some disadvantages.


A revocable trust won't protect your life insurance policy or any other assets in the trust from creditors, either before or after your death. While you're alive, any creditors who obtain judgments against you can use them to attach to the trust. After your death, most states allow creditors a certain amount of time to file claims against your estate, which will include the trust and all of the assets it contains. If the estate's other assets aren't sufficient to cover your debts, the trustee will have no choice but to turn over your life insurance proceeds.


You can avoid most of the disadvantages of a revocable life insurance trust by making the trust irrevocable instead. However, once you create an irrevocable trust, you can't make any changes to its terms, and you will no longer be able to borrow from the insurance policy. Furthermore, if you transfer a life insurance policy into an irrevocable trust, you must live for at least three years. Otherwise, the irrevocable trust won't protect the policy from creditors or estate taxes.