L&HGeorgiamedium
A Georgia life policyowner adds a spendthrift clause to the beneficiary designation. What is the practical legal effect of this clause on the policy proceeds being held by the insurer under a settlement option?
AIt accelerates payment of the proceeds in a lump sum free of all taxes
BIt allows the beneficiary's creditors to garnish proceeds directly from the insurer
CIt transfers ownership of the policy to a court-appointed trustee
Unpaid proceeds are shielded from creditors and cannot be assigned
Why this is the answer
A spendthrift clause directs the insurer to hold proceeds under a settlement option (typically fixed period, fixed amount, or life income) and restricts the beneficiary's ability to assign, commute, encumber, or accelerate future payments. Such provisions generally protect unpaid amounts from claims of the beneficiary's creditors, providing income stability for beneficiaries who lack financial discipline or face creditor exposure.
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