Annuitant Died, Owner Did Not

[clmmbk]

What is the name of your state?Pennsylvania - My mother bought an annuity with her inheritance and made her husband the annuitant. The policy lists 'children' (no child in particular) as primary beneficiaries. My mother has two adult children, myself and my brother, and her husband had two adult daughters. Insurance company said that even though she was the Owner, death benefit would be disbursed to 'the children' as stated in the policy. My mother was shocked to find this as that was never the intent. The children were only to be beneficiaries if she and her husband died at same time, otherwise, she was to remain in control of the funds unless she died first. Insurance company has decided to interplead the money to PA. My brother and I 'assigned' our share of the benefit to my mother (to pay for funeral expenses) and asked that our share not be interplead at all but her deceased husband's daughters will not assign their benefit and furthermore are now arguing that my brother and I have no claim to any benefits as it was their father who was the annuitant (even though no particular children were identified in the policy). Why is my mother, as the Owner of the annuity, not allowed to retain control of the annuity if she is the one that bought it and do her husband's deceased daughter's have a greater claim as children than my brother and I?

 

[somarco]

Seems to me the carrier was simply following the contract. Your mothers husband was the beneficiary (annuitant) with a contractual line of distribution upon his death. Your mother as the owner had the right to change the beneficiary as long has her husband was alive, but upon his death distribution would be directed by contract to successor beneficiaries.

Reading your post, your mother should have been the primary beneficiary (upon the death of her husband) and the children could have been named secondary beneficiaries.

If the beneficiary designation just said "children" with no names (as you indicated) I can see how the carrier would interpret as children of the initial beneficiary (annuitant) as you and your brother bear no blood relationship to your mother's deceased husband.

This is a mess that was created when the annuity was purchased, or at the least when the beneficiary designations were dictated. Whose decision was it to set up the beneficiaries in this way? Assume there was an agent involved. Did he/she have any input into designating the beneficiaries or was this all done by your mother without coaching or assistance?

Was this a period certain annuity or some form of survivorship annuity?

 

[clmmbk]

Annuitant Died...

Thanks for responding. I'm not sure the type of annuity but that it was the type that she could invest as she liked and withdraw/deposit at her discretion. I do know that my mother used money she received from my grandfather to set this up about 10 years ago so that there would be funds to pay for her/his/both funeral expenses. There was a broker involved and it was my mother's understanding that the children would be 'contingent' beneficiaries unless both died simultaneously and that as Owner she OWNED the money even if her husband died. My mother's attorney remains convinced that as Owner, she retains the rights and is prepared to sue broker/agent (not underwriter as they do seem to be following terms of policy) for errors and omissions. Even underwriters have expressed that this is a mess. To make matters even more weird, is that originally, 'children' was meant to be my brother and I as the money came from our grandfather and we were the children of the Owner. Her husband and his daughters were estranged until very recently (when they knew he was terminally ill). The amount is under 50K but she's retired and every dollar is important as there was no insurance from her husband. At this point, she is unsure if legal contest is worth fighting but is galling her that it was her inheritance from her father (she was only child) and that her deceased husband's daughters feel no compulsion to let her have the cash to pay for funeral expenses (from July '04). Forgot to mention there is a page in my mother's and her husband's 'financial plan' confirming his understanding that my brother and I would be only beneficiaries which he did sign but is not a part of the annuity policy. It's been said a million times but it's sad what a death will bring about when there is even one dollar to be had.

 

[somarco]

Sounds like it was a deferred annuity as opposed to an immediate annuity. Your original post made it seems as if it were an immediate annuity and payments had been made to her husband on a regular basis . . . or maybe that was my misinterpretation.

If payments to her husband had not begun, then it would seem she would still have control of the funds and no disbursement of the remaining funds would have been made to the children.

What is confusing is you use the term "annuitant" to describe her husband, which indicates to me he was receiving payments under an immediate annuity contract. But you also state she could withdraw (and add) funds at her discretion, which is indicative of a deferred annuity.

These are two separate animals. Are there perhaps two annuitys? One deferred, one immediate?

You might be able to successfully sue, but memories tend to fade, especially over 10 years. What may have been said, interpreted, remembered, etc 10 years ago are certainly not as definitive as what is memorialized in writing.

A letter which is not part of the contract has no bearing on the carriers decision to do anything other than follow the course they have already taken.

Yes, this is a mess.

I dont know that I have helped. There are plenty of attorneys who frequent this board and may have a different slant. I can only go on 30 years experience in the insurance business.

 

[clmmbk]

Annuity Type

Hi - thanks again for responding. I've spoken to my mother and the type of annuity was a Non-Qualified Annuity. He was only 61 at death and the annuity was written when he was 53 and she was 56. No payments were being taken and it was being used as a CD (cert of deposit) alternative as advertised by the broker. It was purchased in one payment and they never messed with it other than making a withdrawal reducing the annuity from 50K to 36K. The broker himself wrote the annuity/policy and there are not separate pages regarding beneficiaries. My mother and her husband were listed as Joint Owners, he was the 'Annuitant' and there is a line regarding 'Primary Beneficiary: Children to share equally' which was handwritten in by the Broker/Agent. I guess she is just trying to figure out if there is any legal leg to stand on regarding her rights as Joint Owner. The intent was that whoever survived the other got the funds and if both died at same time - then children got the funds to pay for both funerals. Thanks again for input.

 

[somarco]

A non-qual annuity simply means it was funded with after tax dollars, not part of an IRA or other retirement vehicle.

Without seeing the policy, going only on what you have posted, it would appear the carrier acted appropriately. The annuitant died and proceeds were payable to his children. What was intended was in contradiction to the way the contract was written. The carrier is right to back off and let the state be the trustee for the funds which are now in dispute.

This appears to be a legal matter, not a contractual matter as it seems the carrier acted according to the written policy. Do you have a claim against the broker? Possibly. It still is a he said, they said situation.

One thing is certain . . . you do have a battle with the beneficiaries over the funds.

 

[Dandy Don]

Since it looks like broker may have been negligent or sloppy or perhaps filled out the contract incorrectly, he should definitely face charges, although your mother does face some responsibility because she should not have signed the contract if it did not truly reflect her wishes. I wonder if she actually explained to the broker her reasoning that she wanted to protect estate in CASE BOTH DIED AT THE SAME TIME. If that in fact was the case, then the contract should have mentioned specific beneficiaries by their exact names instead of just using the generic term of "children to share equally"--most other annuity companies have specific forms that ask for detailed information.

If an annuity contract has joint owners, the distribution at death rules are applied upon the first death.

(1) Do a background check on this broker through the NASD website to see if he has faced other disciplinary charges in the past and also do a check through county courthouse databases to see if he has had past court cases against him.

(2) The letter she has will be important evidence of her intention of who she actually wanted the beneficiaries to be.

(3) Is this annuity with the John Hancock Company?

(4) Find out by contacting the annuity company or some other source (tax accountant or CPA) exactly what the tax liability (federal and/or state) is for this annuity and who is responsible for paying the taxes--there are indications that when the payout is made, the owner MIGHT be responsible for taxes (if I read the rules correctly) and I didn't want your mother to be the recipient of this unhappy news--however I hope I am wrong and it seem logical that the beneficiaries (whoever they turn out to be) might be responsible for the taxes.

(5) Did your mother keep a copy of the policy/contract she signed or not?
I have heard that a copy of each annuity policy/contract may be held at the Securities and Exchange Commission but I don't know if that is true or not--maybe another broker can advise you if needed about that aspect.

Sure hope your mom wins this case and that those other daughters don't get anything!!

DANDY DON IN OKLAHOMA ([email protected])

 

[clmmbk]

Annuitant/Owner

Thanks Don for responding - been a while since I checked my post so sorry for the delay. Seems the whole thing is going to be courts and now evil daughters are claiming that they should be ONLY children to receive anything as they were only children of annuintant. My mother has apparently decided to let them fight for it in court and her attorney will then file errors and omissions claim against broker. I believe funds should be interplead soon and whole thing will sit in courts for awhile. Thanks again for your input...