Annuities - ugh

[BellBarbara]

My mom died a few weeks ago, and for the most part, she had a trust set up and it has been orderly in terms of distribution. Now jump to these two annuities she bought with her IRAs - I can't understand the paperwork!

I consider myself above average in intelligence and relatively knowledgeable about financial matters. Having said that, I have read the documentation for distribution many times and I still don't get it. My sister (trustee) doesn't understand it either.

Once again, shows that these things are too difficult to understand. Luckily, they are a small portion of her estate. We are going to have to set up a conf call with the insurance company.

Also, and this is funny, they won't just send you a check. Instead they set up an account for you so you can write checks on the account. What? They probably will charge us for the checks (2 separate accounts) and fees, just to get the money out.

 

[travelover]

.......... I have read the documentation for distribution many times and I still don't get it............ .

Gee, I wonder why that is?

It couldn't possibly be deliberate on the part of the annuity provider.

 

[justplainbll]

Can you get assistance from the trust attorney?

 

[BellBarbara]

We are trying not to use an attorney as we have been through this with both of our grandparents recently. We hired an attorney for the first one, and just paid them money for almost nothing.

Ah, I see, the attorney that set up the trust. That is a good idea!

 

[justplainbll]

We are trying not to use an attorney as we have been through this with both of our grandparents recently. We hired an attorney for the first one, and just paid them money for almost nothing.

Ah, I see, the attorney that set up the trust. That is a good idea!

My last experience with an estate attorney was not the happiest; cost me 4% of the gross estate. I was the sole heir and it dragged on for about 2 years.

 

[BellBarbara]

My last experience with an estate attorney was not the happiest; cost me 4% of the gross estate. I was the sole heir and it dragged on for about 2 years.

Yes, we had this issue partly with my grandfathers estate. We had to track down dead relatives. It was a huge pain in the neck.

 

[rescueme]

My last experience with an estate attorney was not the happiest; cost me 4% of the gross estate. I was the sole heir and it dragged on for about 2 years.

So, 96% of the estate was taken care of, with no problem, along with taking care of all the necessary paperwork?

That's odds I would be willing to bet on (and I did ).

 

[rescueme]

Once again, shows that these things are too difficult to understand.

Not necessarily. It all depends on the type of annuity.

 

[mickeyd]

Also, and this is funny, they won't just send you a check. Instead they set up an account for you so you can write checks on the account. What? They probably will charge us for the checks (2 separate accounts) and fees, just to get the money out.

I am sorry for your loss BellBarbara.

Insurance companies went to this way to pay off beneficiaries years ago. As I recall the $ goes into a MMF and you get checkwriting priviledge to get at your own money. You can write a check to yourself for the entire amount on day one so there is not really much of a hassle.

 

[justplainbll]

So, 96% of the estate was taken care of, with no problem, along with taking care of all the necessary paperwork?

That's odds I would be willing to bet on (and I did ).

No problem.
$2,000 per hour + appraisal fees and over 2 years to settle an estate with a valid will, a sole heir and no outstanding debts. Then the attorney solicited financial management services for a 2% annual fee.

 

[friar1610]

No problem
$2,000 per hour + appraisal fees and over 2 years to settle an estate with a valid will, a sole heir and no outstanding debts. Then the attorney solicited financial management services for a 2% annual fee.

I was the executor for two estates that were in good order administratively/legally. I hired a lawyer since I was in a different state than the one in which the estate was being settled. I paid him by the hour and did as much of the legwork as I could. One estate was valued at about twice the other but there's no way any lawyer would have deserved to have been paid twice as much for the larger one as they both entailed essentially identical work.

Just as with financial planners, I personally think it's better to pay for services rendered by the hour rather than agreeing to give up a percentage of the estate.

 

[chinaco]

...

Also, and this is funny, they won't just send you a check. Instead they set up an account for you so you can write checks on the account. What? They probably will charge us for the checks (2 separate accounts) and fees, just to get the money out.

There has been some controversy about that practice. They hope to retain management of the funds longer... and earn a spread, maybe even convert it to a sales opportunity.

If it were my money, and I did not intend to keep the funds with the insurance company long-term or permanently (i.e., purchase an insurance product or put it under management using their funds)... or some reason to keep it there... I would transfer it to a FDIC backed bank... perhaps in a CD until I figured out what to do with it. That way it would be in an FDIC insured deposit.

 

[FinanceDude]

My mom died a few weeks ago, and for the most part, she had a trust set up and it has been orderly in terms of distribution. Now jump to these two annuities she bought with her IRAs - I can't understand the paperwork!

I consider myself above average in intelligence and relatively knowledgeable about financial matters. Having said that, I have read the documentation for distribution many times and I still don't get it. My sister (trustee) doesn't understand it either.

Once again, shows that these things are too difficult to understand. Luckily, they are a small portion of her estate. We are going to have to set up a conf call with the insurance company.

Also, and this is funny, they won't just send you a check. Instead they set up an account for you so you can write checks on the account. What? They probably will charge us for the checks (2 separate accounts) and fees, just to get the money out.

Take a deep breath..... Most if not all insurance companies set up check-writing for clients. I have never heard of any insurer charging for the checkbook. Call policyholder services at the insurer and you will get your answers. Don't pay an attorney for a hour to listen to the call. Things should be much clearer after that.

 

[FinanceDude]

There has been some controversy about that practice. They hope to retain management of the funds longer... and earn a spread, maybe even convert it to a sales opportunity.

Did you ever work for an insurance company? How do you know this?

If it were my money, and I did not intend to keep the funds with the insurance company long-term or permanently (i.e., purchase an insurance product or put it under management using their funds)... or some reason to keep it there... I would transfer it to a FDIC backed bank... perhaps in a CD until I figured out what to do with it. That way it would be in an FDIC insured deposit.

There is $12 trillion in FDIC deposits and $117 billion in the FDIC trust fund to cover those assets, just a little info.........

 

[FinanceDude]

Then the attorney solicited financial management services for a 2% annual fee.

That seems like a tremendous conflict of interest........

 

[JohnP]

My mom died a few weeks ago, and for the most part, she had a trust set up and it has been orderly in terms of distribution. Now jump to these two annuities she bought with her IRAs ...

No matter how you would like to handle the money you will need to follow the IRS and IRA rules since your mom used IRA $$ to pay for these annuities. Any distribution from these annuities will be a 100% taxable event. I suspect you would do well to talk to a tax expert.

JohnP

 

[Dimsumkid]

No problem.
$2,000 per hour + appraisal fees and over 2 years to settle an estate with a valid will, a sole heir and no outstanding debts. Then the attorney solicited financial management services for a 2% annual fee.

I thought my estate attorney was expensive at $225/hr. Am I the only one here who thinks $2,000/hr is really out of whack? I'm hoping that was a typo!

 

[chinaco]

Did you ever work for an insurance company? How do you know this?

The news. The specific issue was related to service men and their death benefit.

Life Insurance Firms Profit From Death Benefits : NPR

There is $12 trillion in FDIC deposits and $117 billion in the FDIC trust fund to cover those assets, just a little info.........

As I stated in my post... that is what I would do!

What if the company has a low financial strength rating or is a small company? Do you know if those funds are guaranteed by any other entity if the insurance company has problems?

 

[rescueme]

I thought my estate attorney was expensive at $225/hr. Am I the only one here who thinks $2,000/hr is really out of whack? I'm hoping that was a typo!

I agree.

 

[BellBarbara]

There has been some controversy about that practice. They hope to retain management of the funds longer... and earn a spread, maybe even convert it to a sales opportunity.

If it were my money, and I did not intend to keep the funds with the insurance company long-term or permanently (i.e., purchase an insurance product or put it under management using their funds)... or some reason to keep it there... I would transfer it to a FDIC backed bank... perhaps in a CD until I figured out what to do with it. That way it would be in an FDIC insured deposit.

YES! Clear they are trying to convert me to a customer. Most of the options are about this. I plan to get the money out and move it to a bank. My portion is not large, maybe 20-25K, we don't know, they won't tell us how much it is until we make our selection. Kind of funny.

 

[Brat]

Don't they need to send a 1099 to IRS annually? Look for you Mom's last tax return paperwork.

 

[BellBarbara]

No matter how you would like to handle the money you will need to follow the IRS and IRA rules since your mom used IRA $$ to pay for these annuities. Any distribution from these annuities will be a 100% taxable event. I suspect you would do well to talk to a tax expert.

JohnP

Yes I know they are income, the insurance company withholds, etc. They state in the docs about all of this and allow you to specify how much to withhold (over the minimum they are required to) and can input the amt for your state.

I do not need to pay a tax expert to know this.

 

[FinanceDude]

What if the company has a low financial strength rating or is a small company? Do you know if those funds are guaranteed by any other entity if the insurance company has problems?

Most states have a guaranty program in place, in Wisconsin its $300,000 per insurer.

 

[FinanceDude]

Survivors of service men and women are told they'll get a $400,000 life insurance payout. They don't. Instead, Prudential — which has a government contract to provide life insurance for military families — keeps their money.
Families are surprised when they receive what looks like a checkbook. In documents, Prudential promises to hold the money in safekeeping for as long as families would like, saying it will pay them 0.5 percent interest. What Prudential doesn't disclose is that it is keeping survivors' money in Prudential's own corporate investment account, where the company is earning five to 10 times as much as it pays to families. The so-called checks have JPMorgan Chase printed on them, but they cannot be used as regular checks. Instead, they are to be submitted back to Prudential to get any money

Looks like NPR needs to do some due diligence before they publish such crap. Prudential CAN NOT keep death benefits, that's illegal! Most if not all insurance companies send a checkbook to the beneficiary. I got one from American Family when my sister died. I filled out a beneficiary claim form, and sent it along with a legal copy of her death certificate to American Family, and got a check 4 days later. I threw the checkbook away, and that was that.

Every insurance company keeps their money outside of the reserve required by law, invested in things that get as high an interest rate as they can, be it corporate bonds, municipal bonds, equipment leasing contracts, stocks, etc, etc. Pru could pay a higher rate than .5% but that's what most banks are paying for a liquid account.

I have had plenty of issues with insurers over the years but articles like this full of wrong statements are not worth the paper they are written on. Prudential is not going to cut a check for $400,000 to someone on the phone just because they say they are the beneficiary. Beneficiaries have to do a death claim form in order to get the funds released to them. Of course, the article "forgets" to mention that.

 

[Bestwifeever]

My mom died a few weeks ago....

So sorry for you.