Tag: Annuity

10 Jun

Beware of the Annuity Sharks

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An article published in The Columbus Dispatch, an Ohio publication, shows us how vulnerable seniors can be to fraud through the purchase of financial products that are technically legal but not in their best interest.

An 83 year-old woman had her life savings placed in an annuity but was subsequently solicited to cash in her existing policy and buy a new one. The 83 year-old suffered from partial blindness as a result of diabetes, dementia and she had recently moved into a nursing home. After being convinced to purchase a new annuity, the woman died two weeks later. She received one monthly payment of $1,500 before she died. 

The beneficiaries of her estate received half of what they thought they should have from the new annuity and sought to recover from the investment company. The arbitration panel of the Financial Industry Regulatory Authority sided with the deceased’s estate and awarded the beneficiaries of her estate compensatory damages.

The article states that this is not an uncommon practice. In January 2008, the Financial Industry Regulatory Authority fined the broker $225,000 for “making unsuitable sales of deferred variable annuities to 23 customers”. 

Annuities can be great investments, but BUYER BEWARE. If there are questions about the age and health of the potential purchaser, it may not be in their best interest to purchase the annuity.

Thank you for reading,

Rick Bickhram

 

27 Jan

An Annuity by Will

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Annuities are often employed when an individual plans his or her estate. We have covered different aspects of annuities on past blogs on Hull on Estates.

A testator, for example, may choose to have one child’s portion of the future estate placed into an annuity that will create a flow of money over time. The child would have access to the cash flow, but not necessarily access to the principal amount. 

In September 2008, Gayle Reid applied to the Superior Court of Justice for an interpretation.  The claimant’s father, Bernard Wiesberg, died and left an annuity to his friend, Avonne Richter (also identified as his common-law spouse). Minimum annual payments of the annuity were directed in the Will to Ms. Richter who received them from 2003 through to 2007. 

The Applicant was to receive the residue of her father’s estate.  A 2005 Order by Dandie  J.  required Ms. Richter to designate Ms. Reid as the beneficiary.  (A provision of the Income Tax Act required the beneficiary to be named, otherwise the retirement income fund would have collapsed, defeating the testator’s intent.)

The issue arose when Ms. Richter, who received the previous annual annuity payments in arrears up to 2006, chose to take the $17,015.57 payment in January, in advance for that year. Ms. Richter died on April 17, 2007.

The Applicant sought an interpretation of her father’s Will, specifically regarding the annual payments. As the payments were for the “lifetime” of Ms. Richter, the Estate owed $12,027.44 to the Applicant because the Court reasoned that calculations must be made to the date of Ms. Richter’s death. Therefore a pro-rata calculation was “the only reasonable and fair manner to ensure the two gifts in the Will are honoured.”

If the annuity had been paid in arrears that December, Ms. Richter’s Estate would have been owed a pro-rata amount of the annuity for that year calculated to the date of her death.

Have a good day.

Jonathan

30 Oct

Rolling Assets Into Trust – Hull on Estate and Sucession Planning Podcast #84

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Listen to Episode 84 – Rolling Assets Into Trust
This week on Hull on Estate and Succession Planning, Ian and Suzana further last week’s discussion on trusts and tax planning wills by illustrating the benefits of rolling over assets and being conscious of tainted trusts.

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