by marc » Mon Feb 02, 2009 02:05 pm
Hello, my father is died and he had some annuities where the benificiary is his wife. But in his last testament, he gives these annuities to his children(giving all identification numbers in his testament). What to do with this?
Posted: Thu Jul 14, 2011 03:34 am Post Subject: Annuity
Another update! My brother called me this evening to discuss my Mother's annuity, he said his attorney directed him to do so. After two hours of discussion here is what I found out.
The agent of record has given a sworn statement (notarized) to my brothers attorney stating that my mother was of sound mind and signed the MONY beneficiary change form (with the Hartford contract number on it). He also states that he gave the original to his associate to be mailed to Hartford. It was never mailed.
My brother received a copy of the signed MONY change form and so did my mother (February 2009).
The agent has given me an ammendment to the statement he gave to my brothers attorney stating he mailed the original and two copies back to my Mother after he contacted her on the phone. He told her that he was mailing them back to her because they were on the wrong form and told her that she would need to fill out the Hartford form. The agent also states that at that time he asked my Mother if this was what she wanted, my Mother said let me think about it and that she would call him back. He states that my Mother never contacted him to let him know one way or the other.
My Brother is positive that My Mother wanted him to have ALL of the annuity money. He says it is the agents fault that this happened. And he should be awarded the funds in the Annuity.
I told him that the agent made an ammendment to the statement his attorney has and the agent states my Mother never followed through with him.
What a mess!!! My brother is pissed at me, he thinks I had something to do with this.
Knowing this information what are your thoughts on how this will play out in court (interpleader).
What should I do?
Thanks for you feedback.
G
Posted: Thu Jul 14, 2011 10:04 am Post Subject:
You're wrong. This is an annuity and there is a named beneficiary (actually two beneficiaries), so it is not the property of the estate -- the proceeds are due to one or both beneficiaries
.Max, you are consistent in regard to posting incorrect information.
A named beneficiary allows an asset to get paid directly to that beneficiary and avoid probate. However, it is still an asset of the estate when the owner dies.
Ex. Max dies with his only asset being a $10,000,000 life insurance policy on his life with his mom as beneficiary. The insurance company will pay the money to his mom. That does not change the fact that the value of his estate will be $10,000,000 and estate taxes will be due.
Posted: Thu Jul 14, 2011 02:31 pm Post Subject:
You know, you constantly argue over meaningless things. And here, you inconveniently change the subject.
That does not change the fact that the value of his estate will be $10,000,000 and estate taxes will be due.
There was no discussion here of ESTATE TAXES until you brought it up. The annuity proceeds in this discussion are NOT part of the estate, because two beneficiaries were named and existed at the time of the owner's death. I have no disagreement with your assertion that for estate tax purposes, the VALUE of the annuity is. But, as with many of your other posts, you fail to read and understand the question [and by your own admission, you don't answer questions], and as a result you make inappropriate remarks.
The matter of estate taxes has ABSOLUTELY NOTHING TO DO with the OP's question or any of the previously posted responses, each of which is accurate. You waste everyone's time with your BS interruption.
But it demonstrates that you apparently have no understanding of the issue. PROPERTY LAW is the only thing at issue here. The beneficiaries are in a dispute over whose property the annuity proceeds are. The insurance company is in the middle and, most appropriately, does not wish to be the arbiter of the dispute.
Because the matter is connected to the death of a person, the logical place for that decision to be rendered is in probate court. But it doesn't have to be decided there. Any court of "competent jurisdiction" can decide the matter, from Small Claims to the US Supreme Court. For the sake of time and expense, it would be more convenient for all parties involved not to take this matter as a separate issue to another courtroom.
Like life insurance, annuity proceeds payable to a named beneficiary become, at the very moment of the death of the owner, the property of the beneficiary and are payable upon "presentation of due proof of death". They, like life insurance proceeds, are protected against the claims of creditors--of either the decedent or the beneficiary--before the beneficiary has the money in hand.
Claims "at equity" of another person who believes they have a contractual interest (divided or undivided) in those proceeds (such as in the case of a collateral assignment, which is very different than the claim of a general creditor) are a different matter. And this is the reason the insurance company files its interpleader, because it does not want to be a party to the dispute.
The only issue here is the dispute over distribution of the proceeds. One of two beneficiaries believes he is entitled to as much as 100% of the proceeds based on a beneficiary change form discovered after the death of the annuity owner that (apparently) was not filed with the insurance company as required. It will be up to the court to decide if those documents are one beneficiary's proof of his claim or not. [[ For the record, I don't believe the court will uphold that claim, but I don't have all the facts here either, and something important may very well have been omitted. ]]
As a general business practice, the insurance company only pays money to whom it has listed as the beneficiary(ies). Because of the known dispute in this case, the insurer chooses not to pay any beneficiary until the claim forms are received from all (nothing truly improper about that, but some insurance companies simply pay the money and let others figure it out later). Because one refuses to submit the paperwork, the other cannot collect. Who makes the final determination? The court will if the beneficiaries cannot voluntarily agree.
If a probate action has already been opened, it can be decided in that court. It is not an action against the estate, but an action between persons with an interest in the estate. If there is no probate, it is simply a civil action (a claim for money/property) on the part of one beneficiary against the other. Either way, the insurance company has no reason to, and does not, involve itself in the dispute; it simply files the interpleader, together with a check for the proceeds payable to the court, and it's out of their hands and up to the court. When the court makes a final determination, it writes checks to the parties entitled to the money.
Posted: Thu Jul 14, 2011 04:33 pm Post Subject:
If it is $100 instead of $10,000,000, it still doesn't change anything. It is still part of his estate at death. No comments have been made claiming that it gets paid to the estate. Where the money gets paid is meaningless in that regard.
Max, I understand that what I'm talking about has nothing to do with answering the question. You might find it ok to post incorrect information if it doesn't impact the question. Personally, I believe that as a moderator, you have a responsibility to make sure that all of your information is correct.
Posted: Thu Jul 14, 2011 05:03 pm Post Subject: Annuity
And here is the last tidbits of information before we go to court. The agent will testify that the wrong forms were initially used to make a beneficiary change, my mother signed the forms and sent them to the agent. The agent then realized his mistake, called my mother and asked her if she wanted him to mail her the Hartford beneficiary change form, my mother said no, send ALL the forms back to me, the agent did that and my brother found the documents in her lockbox after her death, two copies and the original. My brother says the agent has the original, the agent says my brother has the original because he mailed it back. My question is; hows does this impact me as a beneficiary on the annuity contract? My brother still contends he should receive 100% of the annuity funds.
Hartford washed their hands and has taken the interpleader route (I don't blame them!).
One last comment. Max thanks for all your input, you have been very helpful. As for all the individuals who find fault with your statements " instead of attacking" Max it would be nice to if you brought additional information that would be useful and helpful to the person looking for guidance. Keep up the good work Max!
Posted: Thu Jul 14, 2011 05:56 pm Post Subject:
you have a responsibility to make sure that all of your information is correct.
If you believe there is anything in this thread that is incorrect, identify it specifically.
If it is $100 instead of $10,000,000, it still doesn't change anything. It is still part of his estate at death
You are completely mistaken, if you are asserting that the annuity proceeds are "PART OF HIS ESTATE". You are confusing property rights with estate valuation.
Because there are named beneficiaries, the annuity proceeds are NOT part of the corpus of the estate, the value of the proceeds are merely counted as part of the estate's value for tax purposes. The annuity proceeds became the protected PROPERTY of the beneficiaries or others with a "claim at equity" at the moment of death as clearly explained above. They are not payable to the estate. If they were, the beneficiaries might never see a penny of them.
Posted: Thu Jul 14, 2011 06:14 pm Post Subject:
My question is; hows does this impact me as a beneficiary on the annuity contract? My brother still contends he should receive 100% of the annuity funds.
This is really a matter of contract law. The annuity contract spells out the precise manner in which a beneficiary is changed. Common language in the contract might be similar to: "You may change the beneficiary at any time during the Annuitant's lifetime. A written request in a form acceptable to us must be made to our Home Office. We may require the policy to record the change. The request will take effect when signed, subject to any action we take before receiving it."
According to this, there is no change of beneficiary as far as the insurance company is concerned if they were never provided "a form acceptable to us". If the court interprets the contract according to contract law, there is no dispute . . . whatever is in the records of the insurance company determines the outcome.
If the court applies some different form of understanding, the signed forms could signal "intent" to change the beneficiary. But, then again, placing the forms in a lockbox and never sending them to the insurance company could be evidence of a "change of heart" and recission of earlier intent. Those forms are going to be dated, and the time lapse between now and then should demonstrate that the decedent had ample time to change her mind a third time in the interim but chose not to.
This will probably boil down to the argumentative skills and legal knowledge of the attorneys and the understanding of contract law on the part of the judge. I doubt that the court will award 100% of the proceeds to your brother, and will agree that the contract permits him to a 50% share as you contend. But judges do strange things and nothing is "for sure" until the decision is rendered.
The unfortunate thing about all this is that when money is involved, family members sometimes behave like total strangers, each vying for a bigger piece of the pie for themselves than for equity and amicability. Proper estate planning tends to overcome this.
(Dying broke might be a better solution! And the book "DIE BROKE" by Stephen Pollan may once again gain some respect, although it needs to be updated with contemporary numbers.)
Posted: Thu Jul 14, 2011 06:26 pm Post Subject:
the annuity proceeds are NOT part of the corpus of the estate, the value of the proceeds are merely counted as part of the estate's value for tax purposes.
Whether we're talking about annuities or life insurance, ever wonder why estate assets have to be sold to pay estate taxes?
It is precisely because the insurance proceeds, when paid to a named beneficiary, are not available to the estate to use to pay taxes. THE PROCEEDS THEMSELVES ARE NOT PART OF THE ESTATE, they belong to someone else.
Posted: Fri Jul 15, 2011 10:52 am Post Subject:
THE PROCEEDS THEMSELVES ARE NOT PART OF THE ESTATE, they belong to someone else
.Max, they are paid to someone else, but that doesn't stop them from being part of the gross estate. Look at IRS form 706.
Ex. Max dies. His only assets are a $10,000,000 insurance policy with his mom as beneficiary, a $5,000,000 IRA with his mom as beneficiary, and a $10,000,000 bank account that is a transfer on death account with him mom as beneficiary.
At death, because Max has an incidence of ownership of all this money, his estate is valued at $25,000,000. None of this money will go through probate. His mom will get all of it. It is ALL part of his estate.
When the estate tax return is done, taxes will be owed on this money. You are correct in that the normal course of action is for estate assets will need to be sold in order to pay the taxes. In this example, there are no estate assets to sell because they all went directly to Max's mom.
The IRS and Max's state (if there is a state estate tax) will go after Max's mom for the money.
Max, another way to think of this might be to look at the situation at the moment of death. At the moment of death, the money doesn't belong to the beneficiary because they haven't yet made a claim. This isn't just semantics. Keep in mind that the beneficiary has the ability to disclaim the money if they so choose. At death, the value of the money is part of the estate. The fact that it ultimately may get paid directly to a person doesn't change the fact that the money is part of the estate.
Maybe this time, you can finally admit to being wrong.
Posted: Fri Jul 15, 2011 07:17 pm Post Subject:
Form 706 says nothing about insurance proceeds as property, only as value. "Part 5, Recapitulation".
You have a wonderful understanding of ESTATE TAXES . . . but that's not true of PROPERTY LAW. You demonstrate your confusion here:
At death, the value of the money is part of the estate. The fact that it ultimately may get paid directly to a person doesn't change the fact that the money is part of the estate.
You should read what the IRS says about estate tax:
The Estate Tax is a tax on your right to transfer property at your death.
The value of the money is one thing, the money itself is entirely another. Money is property. It has value. A life insurance contract is property. It has value. The property is what is transferred, the value is what is owned by the decedent's estate. If there is cash money IN THE ESTATE and due to be transferred to others, it must first be used to satisfy debts of the estate, and tax claims have a priority over all other claims except wages owed to employees.
But life insurance/annuity proceeds that are not payable to the estate are never the "property" of the estate and cannot be used to satisfy debts of the estate -- they become the property of the beneficiary at the exact moment of the death of the insured/anniuty owner/annuitant. At the moment of death the contractual rights of the life insurance policy transfer to the named beneficiary, but the value of the contract remains with the decedent's estate, if the insured had any "incidents of ownership" prior to death.
As I have said REPEATEDLY, and which you cannot get through your dense brain matter, the PROPERTY of the proceeds is that of the beneficiary, not the estate of the decedent. All the estate owns is the value of the money.
His only assets are a $10,000,000 insurance policy with his mom as beneficiary, a $5,000,000 IRA with his mom as beneficiary, and a $10,000,000 bank account that is a transfer on death account with him mom as beneficiary.
Please don't mix IRA money and bank accounts -- which are considered "income in respect of a decedent" -- into the discussion with life insurance proceeds payable to a beneficiary. But to help you with this . . .
The IRS and Max's state (if there is a state estate tax) will go after Max's mom for the money.
Income in respect of a decedent is taxable to the person who receives it, but according to the IRS (Publication 559 -- let's talk about real guidance, not forms),
This income in respect of a decedent is also taxed when received by the recipient (estate or beneficiary). However, an income tax deduction is allowed to the recipient for the estate tax paid on the income.
Nowhere in Publication 559 does the IRS equate insurance proceeds payable to a named beneficiary "income in respect of a decedent."
The only claim the government has is on the estate of the decedent. They cannot go after the personal property of another person. The estate owes the tax money to the government, and the executor of the estate has to figure out how to do that. But not on the backs of the beneficiaries of the estate or of insurance proceeds.
The ONLY exception to this that I am aware of is the Government's right to seek recovery of its prior laid income tax liens on the PROPERTY of the decedent, which can include the interest the policyowner has in life insurance CASH VALUE prior to death. In that singular circumstance, the US Supreme Court has held that the Government has the right to recover its lien from the proceeds that were paid to the beneficiary, even though those proceeds are protected under state law from the claims of the decedent's creditors. But they cannot "attack" any other property of the beneficiary. [ United States v. Bess, 357 U.S. 51 (1958) ] The theory of the Court was that during the insured's lifetime, he could have taken the cash value from the policy to satisfy the tax lien. This would have effectively placed a lien on the proceeds payable to the beneficiary, and the beneficiary would be in the same position (financially) after the payment of the proceeds.
Your utter ignorance of estate tax law is glaring and, here, completely exposed to the light -- because you don't understand words and their meanings!
If you would like further proof of THE COMPLETE AND TOTAL FALSITY of your statement that the "IRS and [the] state will go after [the beneficiary] for the money", read the following:
Recipient of pay-on-death account funds not liable for estate taxes, Supreme Court holds
By Joe Forward, Legal Writer, State Bar of Wisconsin
May 7, 2010 – Under federal and state tax law, the recipient of a pay-on-death (P.O.D.) account is not required to reimburse the decedent’s estate for taxes paid, the Wisconsin Supreme Court recently held.
In Estate of Sheppard v. Schleis, 2009AP1021 (May 4, 2010), the supreme court – in an opinion by Chief Justice Shirley S. Abrahamson − applied federal and state tax law to affirm the Circuit Court for Washington County, which granted summary judgment to the recipient of P.O.D. accounts totaling approximately $3.8 million.
Do you even know what "summary judgment' means? It means that no testimony or evidence is required for the court to make its decision. In this case, the decision was based entirely on a combination of FEDERAL AND STATE LAW.
Although you'll probably claim that the "legal writer" who wrote the article is wrong, if you are interested in reading that entire article, here is the link: http://www.wisbar.org/AM/Template.cfm?Section=News&Template=/CM/ContentDisplay.cfm&ContentID=92793
This is merely one of dozens that are similar that I could provide.
So do yourself a favor, and take a class in property law and another in estate tax law before you continue to go around mixing up discussions of property rights and estate taxes.
And, while you're at it, take courses in contract law and life insurance beneficiaries, because you have no idea of these subjects when you write:
At the moment of death, the money doesn't belong to the beneficiary because they haven't yet made a claim. This isn't just semantics
Really? To whom does it belong? The estate? The insurance company? No, it's not semantics, it's the ravings of a lunatic.
At death, the value of the money is part of the estate.
Imagine that! You finally make the only correct statement you have ever made, which is EXACTLY what I have stated numerous times in prior posts.
But then you go right back to semantics class and screw up the whole thing again when you write:
The fact that it ultimately may get paid directly to a person doesn't change the fact that the money is part of the estate.
Now, if you want to go back to semantics class, answer this question: How is the PROPERTY of the policy proceeds part of the estate if the money remains with the insurance company (because the beneficiary has not yet made a claim)?
Answer: It is not.
And, it is also not the property of the insurance company simply because the beneficiary has not yet made a claim. The insurance company has no property interest in the proceeds -- but the beneficiary does, regardless of when the claim is filed. The policy proceeds represent a contractual right to property instantaneously owned by the beneficiary at the moment of death.
That's the whole point. This whole useless diatribe you have created is because you LOVE TO ARGUE SEMANTICS, especially when it has nothing to do with the discussion. And here, you're 100% wrong except when you make the singular statement:
At death, the value of the money is part of the estate.
The only one who needs to admit their error is you.
There is a famous saying among college professors who teach Greek: You can't teach a pig Greek; it infuriates the professor . . . and annoys the pig.
But that's OK, I am only mildly infuriated.
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