Annuities - ugh

[TN_INVEST]

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.

Yup. Write a check for 100% and close it out.

The money is safe. They might actually pay a higher rate than the bank account (usually do). There are all sorts of protection plans in place for cash accounts at an insurance company. I wouldn't lose sleep over this.

 

[justplainbll]

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!

Don't think I made a typo.
How many billable hours do you think an attorney can rack up for the filing of a state estate tax return and a petition to the probate court on an estate that consisted of Treasury Direct Bills, common stock certificates for ED & JPM, a $350K house, assorted bank CDs, and a couple of checking and savings accounts when the executor took care of closing the all bank accounts?
As I recall, the NYS Bar Assoc. published recommended fee for such an estate was 4% and that's what my fancy; Garden City, NY, Escalade driving attorney charged. (His kid's drove Hummers.)

 

[sheehs1]

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.

BellBarbara....Not sure why the companies handling these annuities are different from the ones I handled with my mothers estate. I handled two IRA annuities. Granted that was back in 2003 but still. I suspect...as I am sure you do....that they are deliberately not telling you all the facts. These are inherited IRA's and unless the rules have changed you should have 3 choices.
1. Lump Sum pay out to the beneficiaries
2. Five year pay out to help defer taxation on the entire amount
3. Annuitize it based on your life expectancy. Of course that is the one they want you to do.

You can also transfer "your part" of the inherited IRA to an institution of your choice "in kind" and take your yearly RMD. In other words, if you want it to stay in tact, you don't have to leave it with the annuity company.

I took the lump sum because my financial institution told me they could not transfer in an inherited IRA. My sister transferred hers "as is" to her financial institution and is taking yearly RMD (required minimum distribution)

Start with this if you have not done so already. Scroll half way down to read about inherited IRA's.

Publication 590 (2010), Individual Retirement Arrangements (IRAs)

And remind "them" that they legally have to distribute based on the beneficiary designation. Setting up an account for you is not "distributing it". Nor do I think it satisfies the legal definition of distributing to beneficiaries. Doesn't keep them from trying. Challenge the heck out of them. That is what I had to do.
Best of luck !

p.s. I also suspect you might be speaking with their first level customer service person (whether in the pay out department or not). Tell them you want to speak with their manager and you want access to their legal department. Get names and numbers before they transfer you.

 

[panacea]

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.

Sorry for your loss Bellbarbara.
Was the trust actually the beneficiary of these IRA annuities? Or did she have you as the direct beneficiary for these particular IRAs? There may be an opportunity to avoid being taxed all at once on the distribution (and possibly being pushed into the next tax bracket or higher) by rolling these over into an inheritied IRA and taking the distribution over an extended period. Again, it depends on the beneficiary designation and if there was one or more persons named. Be careful about taking the distribution quickly without fully understanding your options. Not sure how much we're talking about here, but it if you're not confident about it, it might be worth paying someone a few hundred to save yourself more in taxes.

 

[chinaco]

Looks like NPR needs to do some due diligence before they publish such crap...

So they all got it wrong?

Here is another one.

Fallen Soldiers' Families Denied Cash as Insurers Profit - Bloomberg


I don't think those articles questioned the legality of it so much... they seem to be questioning the ethics of it.

 

[FinanceDude]

So they all got it wrong?

Here is another one.

Fallen Soldiers' Families Denied Cash as Insurers Profit - Bloomberg



I don't think those articles questioned the legality of it so much... they seem to be questioning the ethics of it.

Uh, its the same article as NPR, it's called "piggybacking" in the media world, one source picks u a story, then another posts it, etc.

It goes back to people needing to become more financially aware of what to do when a loved one dies and you are an insurance beneficiary. It seems to me the media is getting all on the "hammer Wall Street" bandwagon a little too much.

In the OP's post, the annuities are in IRAs. There are tax implications when that happens. I am sure it is policy it enacted due to the "sue anyone anytime" environment we are in......... I could tell horror stories since I have seen a fair number of these go bad, but I digress.

 

[BellBarbara]

Thanks everyone. My husband is a very high wage earner, so really doesn't matter on taxes, unless I defer until he stops working.

I do understand the options, I am saying the paperwork is very confusing - sort of like choose this option, but if you're standing on your right leg, go to page 5 clause 7, then you go there, and it seems totally unrelated. Why are you sending me there? The paperwork is terribly written (I am in the technical education field) and even the lump sum option which should be pretty clear, just isn't.

Thanks for your condolences. My mom was suffering from end stage dementia, so it while it came quickly at the end, we have been grieving over the last 18 months or so.

 

[TN_INVEST]

So they all got it wrong?

Here is another one.

Fallen Soldiers' Families Denied Cash as Insurers Profit - Bloomberg


I don't think those articles questioned the legality of it so much... they seem to be questioning the ethics of it.

Media sensationalism.

DOn't know if I'd say they got it wrong, but I would like to consult with Paul Harvey and get "the rest of the story."

I know for a fact there are thousands of folks that have earned more money in those retained accounts than have ever been told they couldn't buy a camera at Target with those checks.



...........she had always believed that her son’s life insurance funds were in a bank insured by the FDIC..... they didn't get it wrong, but she got it wrong



I do really want to know (I'm willing to be open minded and educated) if there have ever been cases where folks couldn't get their money out of the retained asset accounts. Have any life insurance proceeds vanished because the insurance companies went under? That would stink big time. But to say there are policies and procedures in place...mmehhhh, that's not newsworthy.

Guess I'm just not in the mood for all the victim mentality stuff this morning (maybe i need another cup of coffee).

 

[FinanceDude]

Media sensationalism.

DOn't know if I'd say they got it wrong, but I would like to consult with Paul Harvey and get "the rest of the story."

I know for a fact there are thousands of folks that have earned more money in those retained accounts than have ever been told they couldn't buy a camera at Target with those checks.



...........she had always believed that her son’s life insurance funds were in a bank insured by the FDIC..... they didn't get it wrong, but she got it wrong



I do really want to know (I'm willing to be open minded and educated) if there have ever been cases where folks couldn't get their money out of the retained asset accounts. Have any life insurance proceeds vanished because the insurance companies went under? That would stink big time. But to say there are policies and procedures in place...mmehhhh, that's not newsworthy.

Guess I'm just not in the mood for all the victim mentality stuff this morning (maybe i need another cup of coffee).

+1