DAN MORALES 

ATTORNEY GENERAL 

@ffice of tfp Zlttornep 43eneraI 

&ate of ZEexas 

June 9.1992 

Ms. Georgia D. Hint 

Commissioner 

Texas Department of Insurance 

P. 0. Box 149104 

Austin, Texas 78714-9104 

Opinion No. DM-125 

Re: Whether, considering sections 42.001 

and 42.002 of the Property Code and 

article 21.22 of the Insurance Code, life 

insurance policy proceeds and cash values 

are completely exempt from seizure under 

process, and related questions (RQ-2Sl) 

You have requested our opinion regarding whether and to what extent state 

law exempts from seixure under process life insurance policy proceeds and cash 

values, and individually purchased annuities. Specifically, you ask the following: 

(1) Whether insurance policy proceeds and cash values are 

completely exempt from seizure under process or whether those 

benefits are exempt from seizure to the extent of the maximum 

amounts set out in section 42.001 of the Property Code; and 

(2) Whether the Texas Insurance Code article 21.22 exemption 

includes individually purchased annuities. 

The resolution of the first issue you raise requires this office to construe two 

apparently conflicting statutes, both of which the 72d Legislature amended during 

its regular session. Senate Bill 654, Acts 1991, 72d Leg., ch. 175, 8 1, amended 

section 42.001 of the Property Code to read, in pertinent part, as follows: 

(a) Personal property, as described in Section 42.002, is 

exempt from garnishment, attachment, execution, or other 

seizure iE 

(1) the property is provided for a family and has an 

aggregate fair market value of not more than $60,000, 

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Ms. Georgia D. Flint - Page 2 (DM-125) 

exclusive of the amount of any liens, security interests, or 

other charges encumbering the property; or 

(2) the property is owned by a single adult, who is not a 

member of a family, and has an aggregate fair market value 

of not more than $30,000, exclusive of the amount of any 

liens. security interests, or other charges encumbering the 

Property. 

Prop. Code 542.001(a). Section 42.002 describes twelve categories of personal 

property that are exempt under section 42.001(a), including “the present value of 

any life insurance policy to the extent that a member of the family of the insured or 

a dependent of a single insured adult claiming the exemption is a beneficiary of the 

policy.” Id S 42.002(a)(12). Thus. under sections 42.001 and 42.002, a person may 

exempt from seizure under process personal property from any combination of the 

twelve categories, so long as the aggregate fair market value of the exempted 

personal property does not exceed either $60,000, if the property is provided for a 

family, or $30,000, if the property is owned by a single adult who is not a member of 

a family.1 A person whose property is subject to seizure under process could choose 

to exempt from seizure the present value of a life insurance policy to the extent that 

a family member of the insured or dependent of a single insured adult claiming the 

exemption is the beneficiary, but only if the aggregate fair market value of all the 

personal property the debtor chooses to exempt does not exceed the amounts set 

forth in section 42.OOl(a)( 1). (2). 

Senate Bill 1261, Acts 1991,726 Leg., ch. 609,s 1, amended article 21.22 of 

the Insurance Code in a way that, you contend, conflicts with sections 42.001 and 

42.002 of the Property Code. In pertinent part, article 21.22 now reads as follows: 

Notwithstanding any provision of this code other than this 

article, all money or benefits of any kind, including policy 

proceeds and cash values, to be paid or rendered to the insured 

or any beneficiary under any policy of insurance issued by a life, 

health or accident insurance company, including mutual and 

fraternal insurance+ or under any plan or program of annuities 

and benefits in use by any employer, shalh 

thtion 42001(a)(l), (2) of the Propxty Code qwities that the aggregate fair market value is 

to be detrrmincd “exctosivc of the alnouot of any IieIq securiv interest& or other charges encumbering 

the property.” 

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Ms. Georgia D. Flint - Page 3 (DM-125) 

(1) inure exclusively to the benefit of the person for 

whose use and benefit the insurance is designated in the 

policy; 

(2) be fully exempt from execution, attachment. 

garnishment or other process; 

(3) be fully exempt from being Axed, taken or 

appropriated or applied by any legal or equitable process or 

operation of law to pay any debt or liability of the insured or 

of any beneficiary, either before or after said money or 

benefits is or are paid or rendered; and 

(4) be fully exempt from all demands in any bankruptcy 

proceeding of the insured or beneficiary. 

Ins. Code art. 21.22, 9 1. The Insurance Code thus wholly exempts from seizure 

under process life insurance policy proceeds and cash values to be paid to the 

insured or any beneficiary.2 

Senate Bill 654 amended sections 42.001 and 42.002 primarily to raise the 

exemption for personal property from forced sale from $30,000 to $60,000 for a 

family, and to $30,000 for a single adult who is not a member of a family. Unlimited 

Exemption of Insurance Benefits From Seizure Under Process: Hearings on S.B. 

654 Before the Senate Jurisprudence Comm., 72d Leg. 1 (Mar. 26,199l) (statement 

of Senator Parker, sponsor of bill) (copy on file with Texas Senate Staff Services).’ 

%k note that articIe 21.22 of the Insurance Code also whoIIy exempts from seizure under 

prowss policy pmcwds and cash values to be paid under any he&b or accident insurance policy, as 

well as under any Iifc insurance policy. As sections 42.001 and 42.002 of the Property Code only 

exempt from seizure under process the present value of a Iife insurance policy, article 21.22 of the 

Iasurance Code does not conflia with sections 42.001 and 42.W2 of the Property Code on the matter of 

hedth and accident iasttranec poIicies. Accordi&, we limit our discusion to proceeds and cask or 

preswt values paid under a Iife insurance policy. 

%wator Parker pointed out that the S30.000 exemption for pwsonaI property, set in 1973, 

quaIIed $78,000 in 1991. Hearings on S.B. 654 Before the Senate Jurisprudence Comm, X&l Leg. 1 

(Mar. X,1991) (statement of Senator Parker, sponsor of bii) (copy on fde with Texas Senate Staff 

Services); see ubo id (testimony of Neal Miier, witness). This, in Senator Parker’s original biII, he 

proposed to exempt personal property with an aggregate fair market value in the amount of S76W for 

persoml property provided for a family and S38,OOO for psrso~I property ovmed by a single adult who 

is not a member of a family. By the time the Senate had engrossed the bii howw, the exemption 

had been cut to S60,OtXl for personal property provided for a family and m,ooO for personaI property 

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Ms. Georgia D. Flint - Page 4 (DM-125) 

The bill changed the language in a number of other parts of sections 42.001 and 

42.Ckl2 in ways that the legislature hoped would clarity the law, but most of the 

changes were nonsubstantive. See id at 2 (testimony of Joseph M&tight, witness); 

id at 5 (testimony of Mike Maroney, witness). For example, prior to the 1991 

amendments, sections 42.001 and 42.002 provided a limited exemption from seixure 

under process for the “cash surrender value” of a life insurance policy. Senate Bill 

654 changed the terminology from “cash surrender value” to “present value.” We do 

not understand this change to be substantive. Accordingly, the “present value” of a 

life insurance policy, discussed in sections 42.001 and 42.002 of the Property Code, is 

equivalent to the “cash surrender value” or “cash value” of a life insurance policy, the 

term that article 21.22 of the Insurance Code uses.’ 

We note that sections 42.001 and 42.002 do not provide any exemption for 

life insurance policyproceedr, they exempt only the cash value of the life insurance 

policy. On the other hand, article 21.22 expressly exempts life insurance policy 

proceeds. Thus, the two codes do not conflict on the matter of whether proceeds 

are exempt from seizure; article 21.22 unquestionably provides that they are wholly 

exempt. We therefore proceed to consider whether the cash value of a life 

insurance policy is likewise wholly exempt. 

Prior to amendment by Senate Bill 1261. article 21.22 of the Insurance Code 

exempted from seixure under process “money or benefits of any kind to be paid or 

rendered to the insured or any beneficiary” under any life insurance policy. Acts 

1987,7Oth Leg., ch. 5. g 1. at 22. In 1988, the United States Bankruptcy Court for 

the Northern District of Texas interpreted the former language from article 21.22, 

section 1 to exempt from seizure only proceeds paid to the policy beneficiaries. not 

cash surrender values. In re Brothers, 94 B.R. 82, 83 (Bankr. N.D. Tex. 1988). 

Consequently, according to the Brothers court, cash surrender values were exempt 

(footoote continued) 

owaed by a single adult who is not a member of a family. Both houses of the legislature theo passed 

senate bill 654 with these amounts left intacL 

tie “cash surrender value’ of a life insurance contract has been defmed as the cash value (as 

determioed byrules set forth in the governing statute and the nonforfeiture section of the insurance. 

policy) of a policy that a person ha%ing the contractual right to do so has surrendered to the insurer. J. 

GRPILER & W. BPADLES, LAW AND TtiIHE LtFE INSURANCE CONnu’3 439 (1974); see 28 TAX. 

0 3.8U2 (defbhg “cash surrender value” for purposes of regulating variable life insurana contracts); 

BIACX’S LAW DICITONARY 197 (5th cd. 1979) (dcfbdng ‘ca%b surrender value’ and ‘cash value 

option’). Throughout the remainder of this opinion, we use the term “cash values with the 

understdiug that it is quivalcnt to “present value: as s&km 42002 of the Property Code uses 

‘present vahe,” and “cash surrender value.’ 

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Ms. Georgia D. Flint - Page 5 (DM-125) 

under section 42.002(7) of the Property Code (now section 42.002(12)) only to the 

extent that they did not cause the value of the debtor’s total claimed exemptions to 

exceed the aggregate amounts allowed by section 42.001 of the Property Code. 

Subsequent to the Bmthm decision, the legislature amended article 2122, 

section 1 expressly to exempt the cash value, as well as the proceeds, of any life 

insurance policy. The legislature made clear its intent in enacting the amendments 

to article 21.22. The legislature proposed and enacted Senate Bill 1261 to provide 

an “unlimimd exemption from seizure of certain life. . . insurance benefits.” Senate 

Comm. on Economic Dev.. Bill Analysis. S.B. 1261,72d Leg. (1991). Furthermore, 

the legislature was keenly aware of the limitation the Property Code placed on 

proceeds and cash values of life insurance, and intended that article 2122 of the 

Insurance Code override the Roperty Code’s limitations on exemptions. See 

Hearings on S.B. 1261 Before the Senate Economic Dev. Comm.. 72d Leg. 1 (Apr. 

25, 1991) (statement of Senator Parker) (stating that proposed amendments to 

article 21.22 remove limitation that restricted exemption from seizure for life 

insurance benefits) (transcript on file with Texas Senate Staff Services); Hearings on 

S.B. 1261 Before the Senate Economic Dev. Comn~, Subcomm. on Ins., 72d Leg. 1 

(Apr. 15. 1991) (statement of Senator Harris, sponsor of S.B. 1261) (stating that 

proposed amendments to article 21.22 would clarify article so that insurance policy 

benefits Gould not be subject to any caps”) (transcript on file with Texas Senate 

Staff Services); ia! (statement of Dean Davis, Texas Association of Life Underwriters) (stating that existing article 21.22 “runs afoul of. . . what is exempt in the 

Property Code when it comes to bankruptcy”). The legislature also was aware of 

bankruptcy situations, such as the situation in Bmthers, in which creditors would 

attempt to cap, pursuant to sections 42.001 and 42.002 of the Property Code, the 

amount of life insurance proceeds and cash values exempted from seizure. See id 

(statement of Senator Harris); id (testimony of Dean Davis). In accordance with 

the legislature’s express intent, we construe the total exemption provided for the 

cash value of a life insurance policy in article 21.22, section 1 of the Insurance Code 

to prevail over the limited exemption provided in sections 42.001 and 42.002 of the 

Property Code.5 Life insurance proceeds and cash values thus are wholly exempt 

from seizure under process. 

slncidentaUy, we note that to the extent of any irremmilabie conflict behwm sections 42.001 

ad 42.002 of the Property Code and article 21.22 of the Insurance Code, article 21.22 of the Imwmme 

code more spwitkdy pertalus to cash values. See Gov’t Code i 311.m) (stating that special 

provision prevails owr general provision in event of irreconcilable conflict); Attorney General Gpiion 

JM-II37 (1990) at 3 (same). Furthermore, the legislature adopted Senate Bii 1261, amending 

artide 21.22 of the Instuaacc Code, after Senate Bii 654, amending sections 42001 and 42.W of the 

p. 652 
Ms. Georgia D. Flint - Page 6 (DM-125) 

In your second question, you ask whether article 2122 of the Insurance Code 

exempts from seixure under process individually purchased ammities. You note, as 

background, that the exemption in article 21.22 “specifically includes benefits under 

any plan or program of ammities and benefits in use by any employer but omits a 

reference to individually purchased annuities.” See Ins. Code art. 21Z 5 1. We 

note that Senate Bill 1261’s proposed amendments to article 21.22 never included a 

proposal to exempt from seixure individually purchased annuities. Additionally, we 

iInd no legislative history indicating that the legislature ever discussed, in the 

context of Senate Bill 1261, providing complete exemption for individually 

purchased ammities.~ In our opinion, these facts conclusively indicate that the 

legislature intentionally excluded individually purchased annuities from the 

exemption provided in article 2122. 

SUMMARY 

Article 21.22 of the Insurance Code wholly exempts from 

service under process life insurance proceeds and cash values. 

The complete exemption provided by article 21.22 prevails over 

the limited exemption provided to the cash value of a life 

insurance policy under sections 42.001 and 42.002 of the 

(footnote continued) 

Properly Code. See Attorney General Opinion JWlYi7 (1990) at 4 (stating that stahtte latest in 

euactmeut prevails). 

%terestingly, Scnate Bii 654, wbicb amended sections 42001 and 42.002 of the Property 

Code, origbdy provided a total exemption from seizure to the “prcwecds of any life, health, or 

awideul iusuraoa. or enmity poky either before or tier beii paid.. . to the benef&ry, a member 

of the family or a dependent of an insured person.’ See Hear@ 011 S.B. 654 Before the Senate 

Jnris+ce Comm, 72d Leg. 3 (Mar. 26,199l) (testimony of Laura Smreker, Texas Bankers Ass’n) 

(trausai~ oa 6Ie with Texas Senate Staff Services). She tesIi6ed that the proposed unlimited 

exemption of proceeds from annuity pokies would provide ‘some opportunities for debtors to take 

othenvk non-exempt property.. . aad convert those into exempt property that is, is exempt without 

IilllhiOU.... fIps abeady extremely dIf6eult to collect uasaaed debt iu this state and we’re very 

eollcorucd IhaI provi~ Illese temptatloa6 to debtors to wllvert property ia this maMer is going to 

leave the red that there’s (going to] be virtually no assets available to pay tuasewd debt if the 

d&a... defauIts ou his baus and is unable to pay.’ Id at 34. Ms. Smreku’s testimony generated a 

number of questions from the Committee Chair, Senator Green. See id. at 4-5. 

p. 653 
Ms. Georgia D. Flint - Page 7 (DM-125) 

Property Code. Article 21.22 of the Insurance Code does not 

exempt from seizure under process individually purchased 

annuities. 

DAN MORALES 

Attorney General of Texas 

WILL PRYOR 

First Assistant Attorney General 

MARYKELLER 

Deputy Assistant Attorney General 

RmEAHIcKs 

Special Assistant Attorney General 

MADELEINE B. JOHNSON 

Chair, Gpinion Committee 

Repared by Kymberly Oltrogge 

Assistant Attorney General 

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