Need help in breaking an abusive annuity contract

Discusses abuses and issues in financial planning, including questionable compensation practices, bogus institutes and accreditations, bad products, annuity abuse, inappropriate life insurance sales, living trust mills, and related misconduct. Also answers questions about usually legitimate but developing areas such as life insurance premium financing, life settlements, charitable gifting strategies, etc. Includes discussion of asset protection scams.
LDE

Need help in breaking an abusive annuity contract

Postby LDE » Tue Nov 17, 2009 3:00 pm

My father is 86. He grew up dirt poor in the Depression and has been extremely careful with money and investments all his life. He currently owns his house free and clear and has a very small pension income, Social Security, and a couple of small annuities besides the one I want to discuss here. He is suffering from dementia and has no idea what's going on financially any longer. He still lives at home. He also has a good long-term-care policy which will reimburse certain items such as rebuilding his bathtub for easier access. First we would need to lay out the cash, and there's the problem. It's time for him to draw on some of his cash, but it's all locked up in annuities.

I am his only son and sole surviving family member other than my son and heir. The will gives everything to me. A living trust names me as the responsible party in case of disability but he's not sufficiently "disabled" in that sense to activate the trust. I also have power of attorney and control over the checking account.

At the beginning of 2008, when his financial adviser realized (before I or his circle of friends did) that he was starting to become senile, the adviser tipped off another adviser that Dad was a potential fish to be fried. Whereas his largest chunk of money, $100K, had been in an annuity that threw off a guaranteed income and was therefore an acceptable investment, and was in the name of the trust, the new adviser convinced him, rather than renewing that annuity, to take that $50K and another $50K which I think was from stock out of the name of the trust (thus relieving the new adviser from any fiduciary duty) and put it into a different annuity.

The new annuity guaranteed 4% the first year, which was entirely eaten up by commission, and $3K each year thereafter. However, it pays nothing for 15 years and the penalty for withdrawal remains close to 20% up till year 12, then declines somewhat. The only payout is upon maturity, when my dad would be 97. He's had a quadruple bypass, a subsequent heart attack, and a probable stroke and the odds of him living to 97 are very low. All of his siblings who survived to adulthood died at 90.

The life-insurance company that sells these contracts is based in Austin. (We both live in Texas near Austin.) The company is the subject of a class-action lawsuit for selling abusive annuities to the elderly in, I believe, federal court in the Southern District of California.

My understanding is that selling investments of this kind is illegal in some states, but not Texas. I have consulted with a new financial adviser who specializes in elder affairs. When he first heard about the deal, he thought it was illegal under federal statute. However, when he saw the documentation, he said that since it's not a fixed annuity but has the potential for additional appreciation if the S&P does well it's perfectly legal and so far he can't see a good way to break the contract. I may not even have the funds to hire this new adviser unless we can withdraw some money from the annuity, at a penalty of nearly 20%.

I spoke to a California-based lawyer friend of mine about the situation and he advised me that an individual lawsuit was out of the question as the legal fees would eat up the whole $100K. (The new adviser estimated at least $50K, with questionable prospects of winning.) That lawyer also told me to kiss the money goodbye, that there was no chance the insurance company would pay out even on maturity.

That's my instinct as well. A subsidiary of the company has already gone bankrupt and stiffed those it was obligated to. However, I am told that the State of Texas backs insurance contracts for companies that go bankrupt, but I believe that's only up to 80% of value. I am dead certain that the next stage of the con will be for the company to declare bankruptcy and stiff the holders of its annuities. No doubt the money is already in an overseas account or blown on hookers and champagne.

Bear in mind that in Texas judges and the AG's office can be bought pretty cheap, and a company based in Travis County has no doubt already made the necessary campaign contributions to put the thumb on its side of the scales of justice, so I don't expect any help from the state or its laughable courts.

I would appreciate any help any of you can give, especially if you're familiar with the laws of Texas. Some specific questions:

1. Is there any reason I shouldn't proceed to file complaints with the Better Business Bureau and the Texas Department of Insurance?

2. Is there any downside to joining the class-action suit, or is it too late?

3. If I try to withdraw some of the money now is the company likely to engage in stalling tactics? If they refuse to pay up, what do I do then?

4. Am I right in assuming there is little likelihood of ever seeing a payout even if the contract is held to maturity? How can I tell?

5. Assuming the company does go bankrupt and the state is on the hook, is getting what's left a process that will involve years and years of delay and hassle?

6. I am thinking my best hope is in trying to shame the company in the media, such as the local t.v. investigative team or the daily newspaper. Is there any downside to that approach? If I'm completely factual in my statements to the media and avoid inflammatory language, might I yet be hit with a baseless but expensive libel action that will get me in even more trouble?

If you PM me I'd be happy to identify the company and supply electronic versions of some of the appropriate paperwork. It makes me sick that someone who was so careful with money and appeared to do everything right for his retirement got sold out by his own lawyer and advisers. The question now is has he lost 20% or the whole enchilada.

User avatar
Demosthenes
Grand Exalted Keeper of Esoterica
Posts: 5773
Joined: Wed Jan 29, 2003 4:11 pm

Re: Need help in breaking an abusive annuity contract

Postby Demosthenes » Tue Nov 17, 2009 3:57 pm

LDE wrote:The new annuity guaranteed 4% the first year, which was entirely eaten up by commission, and $3K each year thereafter. However, it pays nothing for 15 years and the penalty for withdrawal remains close to 20% up till year 12, then declines somewhat. The only payout is upon maturity, when my dad would be 97. He's had a quadruple bypass, a subsequent heart attack, and a probable stroke and the odds of him living to 97 are very low. All of his siblings who survived to adulthood died at 90.


Much of this description doesn't make sense.

Can you email me a copy of the contract? I'll PM you my email addy.
Demo.

Judge Roy Bean
Judge for the District of Quatloosia
Judge for the District of Quatloosia
Posts: 3529
Joined: Tue May 17, 2005 7:04 pm
Location: West of the Pecos
Contact:

Re: Need help in breaking an abusive annuity contract

Postby Judge Roy Bean » Tue Nov 17, 2009 4:42 pm

LDE wrote:...
I would appreciate any help any of you can give, especially if you're familiar with the laws of Texas. Some specific questions:

1. Is there any reason I shouldn't proceed to file complaints with the Better Business Bureau and the Texas Department of Insurance?

LDE - the failure on the part of people to do that is one of the reasons these schemes proliferate. In my experience, everyone complains the easiest way - via the 'net. The impact of that is rarely significant. (See my response to '6', below.)
LDE wrote:...
2. Is there any downside to joining the class-action suit, or is it too late?

This isn't legal advice of course, but IMHO, class-actions generate more publicity than compensation. Even if you don't join, when and if they come to a settlement, you'll be notified and given the option to participate in the distribution of the paltry amount left over.
LDE wrote:...
3. If I try to withdraw some of the money now is the company likely to engage in stalling tactics? If they refuse to pay up, what do I do then?

4. Am I right in assuming there is little likelihood of ever seeing a payout even if the contract is held to maturity? How can I tell?

5. Assuming the company does go bankrupt and the state is on the hook, is getting what's left a process that will involve years and years of delay and hassle?

You need competent local counsel to address those issues.
LDE wrote:...
6. I am thinking my best hope is in trying to shame the company in the media, such as the local t.v. investigative team or the daily newspaper. Is there any downside to that approach? If I'm completely factual in my statements to the media and avoid inflammatory language, might I yet be hit with a baseless but expensive libel action that will get me in even more trouble?

If a significant number of people are in the same situation, these kinds of stories make good human-interest/consumer warning stories and in some cases can attract the attention of regulators and even elected officials. Having said that, few companies can be shamed into much of anything if their leadership is inherently corrupt. They may even hire a professional PR firm (often an arm of a lobbying entity) to manage public opinion which in some cases is very effective, particularly on a local basis because of media advertising budgets. That's the primary reason you don't see a lot of investigative reporting on things like automobile dealership lending abuses or articles about subprime and payday lenders in their corporate HQ home-town newspaper.

There are also corporate relationships that prevent some issues from getting into the primary local news outlets so if you don't get any interest from those you might approach one of the local "alternative" newspapers who are more in tune with kicking the shins of their big-league competition and the powers that be.
LDE wrote:...
If you PM me I'd be happy to identify the company and supply electronic versions of some of the appropriate paperwork. It makes me sick that someone who was so careful with money and appeared to do everything right for his retirement got sold out by his own lawyer and advisers. The question now is has he lost 20% or the whole enchilada.


FYI - Demo will know more about insurance matters than most of us here.
The Honorable Judge Roy Bean
The world is a car and you're a crash-test dummy.
The Devil Makes Three

jg
Fed Chairman of the Quatloosian Reserve
Posts: 614
Joined: Wed Feb 25, 2004 2:25 am

Re: Need help in breaking an abusive annuity contract

Postby jg » Tue Nov 17, 2009 11:32 pm

Here in Florida, elder financial abuse and exploitation can be, and is, criminally prosecuted.
So, you may wish to also contact the Texas Attorney General.
For example contact information see http://www.oag.state.tx.us/elder/tellers.shtml

See the links at http://www.law.stetson.edu/tmpl/academi ... 2_0_8007_8 for an online compilation of each state’s or entity’s adult protective statutes.

Best wishes.

Blup

Re: Need help in breaking an abusive annuity contract

Postby Blup » Sat Dec 05, 2009 12:16 pm

Keep calling attorneys. Any one who'll charge you $100,000 for this case is shady, IMHO.

jdlegaleagle

Re: Need help in breaking an abusive annuity contract

Postby jdlegaleagle » Fri Jan 22, 2010 5:42 am

Greetings:

I see cases like yours on a very regular basis and you should realize that you are not alone, as we have a national epidemic with regard to the sale of abusive financial products to our aging population. I would be happy to provide a cost free initial review of your case, in an effort to determine if one or more viable solutions are available to you and your father. After reviewing all relevent facts, I could make a determination with regard to the specific options for recovery that may exist and additionally provide you with a specific quote with regard to what the associated costs of such recovery would entail.

In reading your post above and the subsequent posts of other well meaning individuals trying to provide some form of support or guidence, it is very clear to me that you have yet to receive competent or relevent professional advice regarding your situation. Frankly, you most likely have multiple cost effective and very viable options available to you; options that no one to date has even offered or suggested. Below, I have listed my contact and personal professional information, as well as our website for your review. I would be more than happy to speak to you in the form of an initial, cost free, telephone consultation; in an effort to better understand and assess your present situation. If I believe that a viable and cost effective solution exists for your problem, I can outline the specific remidies available and provide the actual costs that might be associated with taking any such actions. I look forward to your response.

Web Site & Contact Information: http://www.firstsourcefinancial.prowebs ... 033166.htm

Best Regards,

Thomas P. MBL, BSLS, RFC, CEP
First Source Financial Group, LLC
Roseville, CA

Blup

Re: Need help in breaking an abusive annuity contract

Postby Blup » Fri Jan 22, 2010 5:47 am

jdlegaleagle wrote:MBL, BSLS, RFC, CEP


All those letters inspire confidence in me fo' sho'. Did you make those up?

EDIT:
Although I wonder. Your name is "jdlegaleagle" yet on your site you say you neither are a licensed attorney nor do you have a JD. I hope you're not holding yourself out as an attorney. California is pretty strict about them pesky little things. ;)
Last edited by Blup on Fri Jan 22, 2010 6:00 am, edited 1 time in total.

jdlegaleagle

Re: Need help in breaking an abusive annuity contract

Postby jdlegaleagle » Fri Jan 22, 2010 5:59 am

Thanks for the vote of confidence. Notwithstanding, a solution to this man's problem and a positive end result in his case, would be worth far more than all of those professional designations. I hope that he takes advantage of our offer and ability to assist him with this all too common problem.

TP

Judge Roy Bean
Judge for the District of Quatloosia
Judge for the District of Quatloosia
Posts: 3529
Joined: Tue May 17, 2005 7:04 pm
Location: West of the Pecos
Contact:

Re: Need help in breaking an abusive annuity contract

Postby Judge Roy Bean » Fri Jan 22, 2010 6:19 am

TP/jdlegaleagle, the poster needs competent legal counsel who can appear/file on his behalf in the state of Texas. Trolling for referrals into your network ain't gonna' cut it.
The Honorable Judge Roy Bean
The world is a car and you're a crash-test dummy.
The Devil Makes Three

jdlegaleagle

Re: Need help in breaking an abusive annuity contract

Postby jdlegaleagle » Fri Jan 22, 2010 10:41 am

Dear "Judge" Bean:

Why don't you take your unqualified OPINION and voice it where it might have some valid purpose, other than taking cheap shots at people who actually do have the ability, interest and resources to assist others. I am making a legitimate, good faith offer, to help this individual AT NO INITIAL CHARGE. You sir, have absolutely NO knowledge with regard to who I am, what services I offer, or who I represent. The fact of the matter is, that I am presently affilliated with multiple, legitimate, individuals and agencies, that may well be able to provide the VICTIM of this inappropriate financial transaction with much needed professional assistance and ultimate resolution.

Your UNSOLICITED OPINION and unsolicited intrusion herein, serves absolutely NO PURPOSE other than to deter the obvious victim of "bad advice," from obtaining legitimate assistance with regard to the failed transaction that they have referenced herein. In fact, just what jurisdiction did you serve in that now allows you to hold yourself out as a "JUDGE." If you in fact have the legal credentials that you now attempt to lead the public to believe that you hold, (JUDGE ROY BEAN), I would think that your time and experience would be far better utilized attempting to assist this family with their request for help in finding resolution to their problem; rather than attempting to defame someone else offering to assist them in their efforts to seek resolution.

Typically, I avoid adding posts in forums such as this, simply because of the fact that there are always people like yourself, who feel compelled to discredit anyone else who might offer an opinion or solution that might detract from their own self serving agenda. Clearly, your interest here is not in helping the people looking for answers regarding their legitimate problem as stated on this web site. Sadly, your purpose seems to be discrediting anyone who might offer a solution or suggestion that doesn't edify or support your own self serving agenda. How sad it is that you would attempt to sabotage the legitimate offers and concerns of others who are truly interested in helping the victims of financial fraud.

Thomas P. MBL, BSLS, RFC, CEP

By the way, I find it beyond belief that a "Judge" or any other legitimate member of the Bar Association of any state, would fail to understand what professional designations and educational credentials are represented by the above.

User avatar
wserra
Quatloosian Federal Witness
Quatloosian Federal Witness
Posts: 6312
Joined: Sat Apr 26, 2003 7:39 pm

Re: Need help in breaking an abusive annuity contract

Postby wserra » Fri Jan 22, 2010 12:25 pm

jdlegaleagle wrote:You sir, have absolutely NO knowledge with regard to who I am


Well, let's look, shall we?

From the site you provided, it appears that you are one "Thomas W. Patston" from California.

Are you the same "Thomas W. Patston" who collected CA state tax liens for most years running (granted, some since released) from the late 90s through last year?

Are you the same "Thomas W. Patston" who collected federal tax liens (granted. some since released) for several years up through 2005? That 2005 lien was for a cool $265K, wasn't it? Was that one ever released, or is it still hanging over your head?

Are you the same "Thomas W. Patston" who filed for Chapter 7 bankruptcy in CAED (docket 02-BK-20748) in 2002?

If the answer to these and other questions is "yes", why should anyone trust your advice?

Typically, I avoid adding posts in forums such as this


I would too, if I were you.
"A wise man proportions belief to the evidence."
- David Hume

Nikki

Re: Need help in breaking an abusive annuity contract

Postby Nikki » Fri Jan 22, 2010 2:39 pm

jdlegaleagle wrote:Dear "Judge" Bean:
<senseless rant omitted>
Thomas P. MBL, BSLS, RFC, CEP

By the way, I find it beyond belief that a "Judge" or any other legitimate member of the Bar Association of any state, would fail to understand what professional designations and educational credentials are represented by the above.


Does that include people who proudly proclaim themselves Associate members (complete with ABA membership number) which status can be attained by anyone who simply pays the annual membership fee?

Also, isn't it either the height of vanity or an indication of severe insecurity to include academic degrees (which were most likely purchased from a diploma mill) in a signature? MBL - Masters in Business Law, BSLS - Bachelor of Science in Legal Studies.

By the way, JRB is an attorney and a judge (which you could have determined with a little checking) so his legal opinions are worth a great deal more than those of someone who couldn't get admitted to law school.

User avatar
Demosthenes
Grand Exalted Keeper of Esoterica
Posts: 5773
Joined: Wed Jan 29, 2003 4:11 pm

Re: Need help in breaking an abusive annuity contract

Postby Demosthenes » Fri Jan 22, 2010 5:06 pm

If you charge a fee for life insurance, disability insurance, or annuity advice in California, you're required to be licensed as an Insurance Analyst with the Department of Insurance.

Lawyers are exempt but you aren't a lawyer.

I don't see your name on the CDI licensee list.

The only license I see is the one that allows you to sell insurance.

Name: PATSTON THOMAS WILLIAM License#: 0770459
Resident Insurance Producer
License type: Life-Only
Status:
Active Status Date:
01/10/2006 Expiration Date:
05/31/2011


Resident Insurance Producer
License type: Accident and Health
Status:
Active Status Date:
01/10/2006 Expiration Date:
05/31/2011
Demo.

Arthur Rubin
Tupa-O-Quatloosia
Posts: 1434
Joined: Fri May 30, 2003 12:02 am
Location: Brea, CA

Re: Need help in breaking an abusive annuity contract

Postby Arthur Rubin » Fri Jan 22, 2010 5:13 pm

Demosthenes wrote:If you charge a fee for life insurance, disability insurance, or annuity advice in California, you're required to be licensed as an Insurance Analyst with the Department of Insurance.
Does that apply if he only gives advice to suckers (um, that should be clients) in other states? In other words, is the licensing requirement attached to the locus of the advisor or of the advisee?

Just curious. I give advice as to the tax consequences of types of insurance, as a CTEC-registered tax preparer, and would like to know whether I'm violating this law, as well.
Arthur Rubin, unemployed tax preparer and aerospace engineer
ImageJoin the Blue Ribbon Online Free Speech Campaign!

Butterflies are free. T-shirts are $19.95 $24.95 $29.95

Judge Roy Bean
Judge for the District of Quatloosia
Judge for the District of Quatloosia
Posts: 3529
Joined: Tue May 17, 2005 7:04 pm
Location: West of the Pecos
Contact:

Re: Need help in breaking an abusive annuity contract

Postby Judge Roy Bean » Fri Jan 22, 2010 5:20 pm

jdlegaleagle wrote:Dear "Judge" Bean:...
By the way, I find it beyond belief that a "Judge" or any other legitimate member of the Bar Association of any state, would fail to understand what professional designations and educational credentials are represented by the above.


Despite the designations and credentials you are so enamored of, I'll rephrase my advice thus far so you'll come to understand the instant matter more clearly: In addition to letting an expert (Demo) render an opinion in insurance matters, LDE needs competent legal counsel in the state in which the issue arose - both parties are in Texas.
The Honorable Judge Roy Bean
The world is a car and you're a crash-test dummy.
The Devil Makes Three

User avatar
Demosthenes
Grand Exalted Keeper of Esoterica
Posts: 5773
Joined: Wed Jan 29, 2003 4:11 pm

Re: Need help in breaking an abusive annuity contract

Postby Demosthenes » Fri Jan 22, 2010 5:23 pm

http://www.leginfo.ca.gov/cgi-bin/displ ... =1831-1849

Excerpts:

A Life and Disability Insurance Analyst is a person who, for a fee or compensation of any kind, paid by or derived from any person or source other than an insurer, advises, purports to advise, or offers to advise any person insured under, named as beneficiary of, or having any interest in, a life or disability insurance contract, in any manner concerning that contract or his or her rights in respect thereto.

Exemptions:

The following persons are exempt from this chapter:
(a) Active members of the State Bar of California.
(b) Any person who has passed all of the qualifying examinations necessary to become an associate of the Society of Actuaries.
(c) An officer or employee of any bank or trust company who receives no compensation from sources other than the bank or trust company for activities connected with his employment which would otherwise subject him to this chapter.
(d) Any person employed by an employer who on behalf of his or her employer or any employee of his or her employer transacts life or disability insurance with, but not on behalf of, an insurer; or,
Advises his or her employer or any employee of his or her employer in any manner concerning life or disability insurance; if:
(1) The employer receives no compensation by reason of such transactions or advice; and
(2) Such person receives no compensation from any source other than his or her employer for such transactions and advice.
(e) An investment advisor, as defined in Section 25009 of the Corporations Code, when acting in that capacity.

Qualifications:

Minimum Age: 18 years.
Residency: California residency is required.
Prelicensing Experience/Education: Section 1849 of the CIC was amended to clarify the eligibility requirements to qualify for the life and disability insurance analyst license. Specifically, to qualify to apply for this license, individuals must be licensed as both a life-only (LO) and accident and health (AH) licensee for five years prior to taking the qualifying examination.
Continuing Education: Not required.

A license to act as life insurance analyst shall not be issued to any person not residing in this state, nor to any person who is under 18 years of age at the time of application.
Demo.

User avatar
Demosthenes
Grand Exalted Keeper of Esoterica
Posts: 5773
Joined: Wed Jan 29, 2003 4:11 pm

Re: Need help in breaking an abusive annuity contract

Postby Demosthenes » Fri Jan 22, 2010 5:29 pm

jdlegaleagle wrote:Thomas P. MBL, BSLS, RFC, CEP

By the way, I find it beyond belief that a "Judge" or any other legitimate member of the Bar Association of any state, would fail to understand what professional designations and educational credentials are represented by the above.


Actually, I was the person behind recent legislation in California to limit the overuse of designations when marketing to seniors.

http://www.nasaa.org/NASAA_Newsroom/Cur ... s/9404.cfm
Demo.

Arthur Rubin
Tupa-O-Quatloosia
Posts: 1434
Joined: Fri May 30, 2003 12:02 am
Location: Brea, CA

Re: Need help in breaking an abusive annuity contract

Postby Arthur Rubin » Fri Jan 22, 2010 5:41 pm

Demosthenes wrote:http://www.leginfo.ca.gov/cgi-bin/displaycode?section=ins&group=01001-02000&file=1831-1849
So, I guess I can't give advice, for a fee, as to the tax consequences of an annuity. And EAs don't seem to be exempt, either. Interesting.
Arthur Rubin, unemployed tax preparer and aerospace engineer
ImageJoin the Blue Ribbon Online Free Speech Campaign!

Butterflies are free. T-shirts are $19.95 $24.95 $29.95

User avatar
Demosthenes
Grand Exalted Keeper of Esoterica
Posts: 5773
Joined: Wed Jan 29, 2003 4:11 pm

Re: Need help in breaking an abusive annuity contract

Postby Demosthenes » Fri Jan 22, 2010 5:51 pm

Arthur Rubin wrote:
Demosthenes wrote:http://www.leginfo.ca.gov/cgi-bin/displaycode?section=ins&group=01001-02000&file=1831-1849
So, I guess I can't give advice, for a fee, as to the tax consequences of an annuity. And EAs don't seem to be exempt, either. Interesting.


I don't think explaining the tax consequences would fall under contractual issues or a client's rights in the contract.

A Life and Disability Insurance Analyst is a person who, for a fee or compensation of any kind, paid by or derived from any person or source other than an insurer, advises, purports to advise, or offers to advise any person insured under, named as beneficiary of, or having any interest in, a life or disability insurance contract, in any manner concerning that contract or his or her rights in respect thereto. Insurance Code Section 32.5.
Demo.

Arthur Rubin
Tupa-O-Quatloosia
Posts: 1434
Joined: Fri May 30, 2003 12:02 am
Location: Brea, CA

Re: Need help in breaking an abusive annuity contract

Postby Arthur Rubin » Fri Jan 22, 2010 6:01 pm

Demosthenes wrote:
Arthur Rubin wrote:
Demosthenes wrote:http://www.leginfo.ca.gov/cgi-bin/displaycode?section=ins&group=01001-02000&file=1831-1849
So, I guess I can't give advice, for a fee, as to the tax consequences of an annuity. And EAs don't seem to be exempt, either. Interesting.


I don't think explaining the tax consequences would fall under a client's rights under the contract.
Sounds like a "magic word" argument to me, especially in the case of an annuity in an IRA, in which the amount of the MDR is a matter of tax law, and if the annuitor (what's the opposite of annuitant?) disagrees with the formula, there could be problems.
Arthur Rubin, unemployed tax preparer and aerospace engineer
ImageJoin the Blue Ribbon Online Free Speech Campaign!

Butterflies are free. T-shirts are $19.95 $24.95 $29.95


Return to “Financial Planning, Estate Planning and Asset Protection Scams”

Who is online

Users browsing this forum: No registered users and 2 guests