by lchmitty » Thu Sep 30, 2010 06:18 pm
My Aunt passed away, previous to her passing she was in a nursing home with dementia.During the time she was in the nursing home my sisiter was Power of Attorney. My Aunt had an Annuity and a person outside our family was named the beneficiary. As Power of Attorney, was my sister able to cash out the Annuity as a means to pay for my Aunt's care without the benefiary's consent?
Posted: Fri Oct 01, 2010 02:49 am Post Subject:
Probably, depends on the POA. Being beneficiary of an annuity doesn't leave you in any control of it, so it's entirely possible to transact withdrawals without consent from a beneficiary.
Using annuity values to pay for long term care needs, even if done by a POA, seems like a reasonable action. Unless there is some information we are missing here.
Posted: Fri Oct 01, 2010 10:45 am Post Subject:
As BNTRS points out, the POA may have included the ability to use annuity cash value (if not already annuitized) for the benefit of the annuitant. Only if the funds were used for some other purpose, such as the direct benefit/personal gain of the sister, might the beneficiary have a claim against the sister -- not the insurance company (reimbursement for the expenses she incurs while managing Aunt's affairs can be the basis of a legitimate withdrawal, and not personal gain).
Using annuity values to pay for long term care needs, even if done by a POA, seems like a reasonable action
Not only is it reasonable, it is a perfectly legitimate use of an annuity prior to annuitization. Even escapes the 10% early withdrawal penalty tax in the case of an annuitant/owner not yet age 59-1/2. Most newer annuities either include a waiver of surrender charges for that purpose, or an LTC rider can be purchased at the time of issue.
Personally, I usually recommend an annuity as the premium funding mechanism for an LTCI policy. Works perfectly when the owner is at least age 59 when purchasing the annuity. 20x the annual LTCI premium at a 5% ROR should both cover most premiums for 25-33 years and premiums will be less than any withdrawal amount subject to any surrender penalty (typically 15% of cash account value). Minimal tax liability on the gain each year, even for persons in the upper tax brackets.
Posted: Fri Nov 26, 2010 04:46 am Post Subject: Does POA allow the cahsing out of an annuity for medical car
I have a similar situation but with a possibly important caveat. I have a relative who made her niece a beneficiary of an annuity. Another relative had POA and used the annuity to pay for the annuitant's medical care rather than use other assets. The person with POA would also be the executor of the estate when the annuitant died, and her children would be entitled to the annuitant's home under the will. The person with the POA used the annuity rather than equity in the home to make sure her children's interest in the home would be preserved. Now the annuitant has died and the POA/executor is selling the home. Would the beneficiaries of the annuitity likely be entitled to proceeds from the sale of the home in this situation? Possible conflict of interest here? Any insight would be greatly appreciated.
Posted: Fri Nov 26, 2010 04:48 am Post Subject:
Posted: Fri Nov 26, 2010 07:30 am Post Subject:
Would the beneficiaries of the annuitity likely be entitled to proceeds from the sale of the home in this situation?
Assuming the annuitant is the owner, then the beneficiaries are entitled to any residual value in the annuity contract. Unless the annuity beneficiaries are other persons named in a will or trust to receive a share of estate assets/proceeds, they have no claim against the home.
Possible conflict of interest here?
Doubtful. If the person who was given POA was the annuitant's conservator (or in a similar relationship) while alive, that person has a fiduciary responsibility to act in the best interest of the individual, not their beneficiaries, and according to the "prudent man" rule.
As such, it would be irresponsible to borrow from a home's equity when other liquid assets are available. Those liquid assets might include stocks and bonds or cash on hand, bank savings/CDs, life insurance cash value, or annuity cash value.
If there was any conflict of interest, it would be something that enriched the person with POA at the expense of the now-deceased annuitant. According to your post, nothing of the sort has happened.
If anyone believes such a conflict has arisen or occurred, or there was a fiduciary lapse, that person can file a petition with the probate court (or other court "of competent jurisdiction") for a hearing on the matter.
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