Assets Protected From Creditors in Connecticut

            In today’s economy more and more people find themselves having a hard time paying the bills and avoiding late payments.  Still others have a problem with creditors chasing them for unpaid debts.  Now more than ever it is important for you to know what assets are protected from creditors and what are not.     

            Connecticut law provides some protection from creditors in a situation where your income or assets are subject to a court judgment or lien.  You can protect yourself in a variety of ways by planning ahead and consulting with a professional financial planner and an attorney.   Taking out liability insurance or setting up a corporate entity or trust for your property are examples of how you can shield your assets from future creditors.  However, there are some individual assets that are automatically protected from creditors.  Here is brief summary of the law in Connecticut: 

            A.            Wages    

            Once a creditor obtains a judgment against you, it can apply for an execution against your wages.  See Connecticut General Statutes, Section 52-361a.  Connecticut law does provide for some protection in this situation.   No more than twenty-five percent of an individual’s weekly disposable earnings may be subject to a wage execution.  The portion of disposable earnings subject to the wage execution is withheld and applied to the amount of the judgment.    In some cases, the maximum amount that can be withheld may be less depending upon the ratio between the individual’s disposable earnings and the hourly minimum wage in effect at the time of the execution. 

            B.             Retirement Plans

            Generally, retirement plans are exempt from claims by creditors.  Both IRAs and 401ks are protected assets pursuant to Connecticut General Statues, Section 52-321a. 

            C.             Personal Property

            Connecticut law provides a list of exempt personal property that creditors cannot claim an interest in pursuant to Connecticut General Statutes, Section 52-352b.  The list of property includes basics necessities such as apparel, bedding, foodstuffs, household furniture and appliances.  Items necessary for a person’s occupation or profession such as tools, books, instruments, farm animals and livestock feed are also considered exempt property.  Wedding and engagement rings are not subject to creditor claims as well.

            D.             Insurance and Government Assistance Payments

            Some insurance and government assistance payments are exempt from creditors under Connecticut General Statutes, Section 52-352b.   Health and disability insurance payments are exempt as are Workers’ compensation, Social Security, veterans and unemployment benefits.  In addition, under Connecticut General Statutes, Section 38a-453, creditors of an insured cannot seek payment from a life insurance policy beneficiary under most circumstances. 

            E.             Child Support and Alimony Payments

            Any court approved child support payments received by a debtor are exempt and protected from creditors.  Alimony payments, to the extent that wages are exempt from creditor claims, are also protected.  See Connecticut General Statutes, Sections 52-352b & 52-361a.

            F.             Real Estate

            Your homestead or personal residence is exempt from creditor claims up to the value of seventy-five thousand dollars.  If a creditor has a money judgment arising out of hospital services, then the value of the exemption increases to one hundred twenty-five thousand dollars.  The exemption is calculated based upon the fair market value of the equity in the property taking into account any statutory or consensual liens on the property.  See Connecticut General Statutes, Section 52-352b.

            There is no such exemption in place for commercial real estate or rental properties.   

            G.             Motor Vehicles

            Only one motor vehicle is exempt from creditor claims up to the value of one thousand five hundred dollars.  The exemption is calculated by estimating the fair market value of the motor vehicle and taking into account any relevant liens or security interests.  See Connecticut General Statutes, Section 52-352b.

           H.              Bank Accounts

         A creditor can enforce a judgment by way of a bank execution.  However, the same exemptions apply to bank accounts as they do to government assistance, insurance, alimony and child support payments as outlined above.  Therefore, you have the opportunity to challenge a bank execution based on these exemptions and prevent a creditor from taking money out of your account.   In addition, you can claim a general exemption not to exceed one thousand dollars.

            In conclusion, Connecticut law prevents creditors from seizing all of your income, property, possessions and savings pursuant to a judgment or lien.  However, the law does not prevent a debt collector from jeopardizing your livelihood and financial wellbeing.  You best bet is to limit individual liability and plan ahead to avoid a creditor claim in the first place.  Consulting with a professional financial planner and an attorney is recommended.       

 

What is a Pre-Need Funeral Services Contract?

A pre-need funeral services contract allows an individual to set aside funds, before his or her death, to be used specifically to pay for funeral expenses. Under the terms of such a contract, a “purchaser” signs the contract and advances funds, which are held in an escrow account for the purpose of paying for future funeral services for the “beneficiary” upon his or her demise. See C.G.S. §42-202. A pre-need funeral services contract may only be sold by a funeral director licensed by the public health commissioner. See C.G.S. §42-201.

There are strict requirements for such contracts under Connecticut law. For example, funeral services contracts must be in writing, and must contain the following:

       (1) The name, address, telephone number and Social Security number of the beneficiary and the purchaser;

      (2) The name, address, telephone number and license number of the funeral director for the funeral service establishment providing the goods or services;

      (3) A list of the selected goods or services, if any;

      (4) The amount of funds paid or to be paid by the purchaser for such contract, the method of payment and a description of how such funds will be invested and how such investments are limited to those authorized pursuant to subsection (c) of section 42-202;

      (5) A description of any price guarantees by the funeral service establishment or, if there are no such guarantees, a specific statement that the contract contains no guarantees on the price of the goods or services contained in the contract;

      (6) The name and address of the escrow agent designated to hold the prepaid funeral services funds;

      (7) A written representation, in clear and conspicuous type, that the purchaser should receive a notice from the escrow agent acknowledging receipt of the initial deposit not later than twenty-five days after receipt of such deposit by a licensed funeral director;

      (8) A description of any fees to be paid from the escrow account to the escrow agent or any third party provider;

      (9) A description of the ability of the purchaser or the beneficiary to cancel a revocable funeral service contract and the effect of cancelling such contract;

      (10) For irrevocable contracts, a description of the ability of the beneficiary to transfer such contract to another funeral home; and

      (11) The signature of the purchaser or authorized representative and the licensed funeral director of the funeral service establishment.

See C.G.S. §42-200(b). A funeral services contract must also contain a statement that if the particular merchandise provided for in the contract is not available at the time of death, the funeral service establishment will furnish merchandise similar in style and at least equal in quality of material and workmanship to the merchandise provided for in the contract.  See C.G.S. §42-202(g). Funeral services contracts should not be confused with burial insurance policies, which are separately codified in the Connecticut General Statutes, under Section 38a-464.

For further information on pre-need funeral services contracts in Connecticut, see Chapter 743C of the Connecticut General Statutes. The General Statutes can be found online at: http://www.cga.ct.gov/. Additional information is available in the State of Connecticut’s Office of Legal Research Report on pre-need funeral services contracts online at: http://www.cga.ct.gov/2007/rpt/2007-R-0578.htm.