Ariz. Rev. Stat. § 20-1131 (D):
� 20-1131. Exemption of life insurance proceeds and cash values from creditors
A. If a policy of life insurance is effected by any person on the person's own life or on another life in favor of another person having an insurable interest in the policy, or made payable by assignment, change of beneficiary or other means to a third person, the lawful beneficiary or such third person, other than the person effecting the insurance or the person's legal representatives, is entitled to its proceeds against the creditors and representatives of the person effecting the insurance.
B. Subject to the statute of limitations, the amount of any premiums for insurance paid in fraud of creditors, with interest, shall inure to their benefit from the proceeds of the policy, but the insurer issuing the policy shall be discharged of all liability on the policy by payment of the proceeds in accordance with its terms, unless before payment the insurer received written notice by or in behalf of some creditor, with specification of the amount claimed, claiming to recover for certain premiums paid in fraud of creditors.
C. For the purposes of subsection A, a policy shall also be deemed to be payable to a person other than the insured if and to the extent that a facility-of-payment clause or similar clause in the policy permits the insurer to discharge its obligation after the death of the individual insured by paying the death benefits to a person as permitted by the clause.
D. If, for a continuous, unexpired period of two years, a policy of life insurance has named as beneficiary the insured's surviving spouse, child, parent, brother, sister or any other dependent family member, then, in event of bankruptcy or in any proceeding before any court in this state, the cash surrender value of the insurance, in the proportion that the policy names any such beneficiary, shall be exempt from claims and demands of all creditors, other than a creditor to whom the policy has been pledged or assigned, and except that, subject to the statute of limitations, the amount of any premiums which are recoverable or avoidable by a creditor pursuant to title 44, chapter 8, article 1, with interest, shall inure to their benefit from the cash surrender value. For the purposes of this subsection, "dependent" means a family member who is dependent on the insured for not less than half support.
Last Amended: 2005
2005
Amended by Laws 1963, Ch. 52, � 2; Laws 1992, Ch. 274, � 1; Laws 2004, Ch. 201, � 1; Laws 2005, Ch. 165, � 2, eff. April 20, 2005.
The 1963 amendment added subsec. D.
The 1992 amendment, in subsec. D, in the first sentence, substituted "twenty-five" for "two", and substituted "except" for "per dependent with a minimum of five thousand dollars or a maximum of ten thousand dollars of cash value and excepting", and in the second sentence, inserted "the purposes of", and substituted "means" for "is defined as".
The 2004 amendment by Ch. 201, substituted "If" for "When" as the first word of subsecs. A and D; deleted the phrase "or in any proceeding" which appeared after "in event of bankruptcy" in subsec. D; and made nonsubstantive changes throughout.
The 2005 amendment by Ch. 165 deleted �other than himself� which had followed �in favor of another person� in subsec. A; and rewrote subsec. D, which had read:
�D. If, for a continuous, unexpired period of two years, a policy of life insurance has named as beneficiary the insured's surviving spouse, child, parent, brother, sister or any other dependent family member, then, in event of bankruptcy before any court in this state, the cash surrender value of the insurance, in the proportion that the policy names any such beneficiary, shall be exempt from claims and demands of all creditors, other than a creditor to whom the policy has been assigned. The exemption on all policies of life insurance relative to any debtor shall not exceed twenty-five thousand dollars except that, subject to the statute of limitations, the amount of any premiums paid in fraud of creditors, with interest, shall inure to their benefit from the cash surrender value. For the purposes of this subsection, �dependent� means a family member who is dependent on the insured for not less than half support.�