Help! My Client Needs to Sell an Annuity

[Watchman]

I do reverse mortgages. I have a 74 year old client that needs to sell his annuity to get the cash to qualify for the reverse mortgage. I am wondering how much he will pay (give up) in order to liquidate his annuity. He wants to do this if it is attractive enough. I have not seen the contract, but I think it is a EIA with 12.5% surrender charges at this time. Also, how long does this take?

As a side note, the Underwriter will not allow us to use the annuity as collateral for a loan. We will have to liquidate or sell it.

Please advise

 

[Norwayguy]

I do reverse mortgages. I have a 74 year old client that needs to sell his annuity to get the cash to qualify for the reverse mortgage. I am wondering how much he will pay (give up) in order to liquidate his annuity. He wants to do this if it is attractive enough. I have not seen the contract, but I think it is a EIA with 12.5% surrender charges at this time. Also, how long does this take?

As a side note, the Underwriter will not allow us to use the annuity as collateral for a loan. We will have to liquidate or sell it.

Please advise

I always thought the collateral on a reverse mortgage was the home? What are you doing with the equity in the reverse mortgage that requires you to do a surrender on an annuity and cost the client 12.5 percent of their money?

You don't sound like you even know what an annuity is when you say he needs to sell it and how much will he get when he sells it because it currently has a 12.5 percent penalty. He only needs to surrender the policy to the carrier...He will get typically 100 percent minus the 12.5 percent surrender and you didn't say if this was a qualified or nonqualified account in the case of a qualified account the standard amount the carrier would send would be 80 percent withholding 20 percent for the tax liability.... nonqualifed they better have the carrier withhold some because I think and obviously your underwriter thinks something isn't kosher with thier liquidity.
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Man I'm coming back to this post.... Something is striking me as very wrong.... Your underwriter wants the client to have more money for as you put it collateral and the way you are accomplishing that is to decrease one of thier accounts by 12.5 percent not to mention any tax liabilities.

Are you sure this is the best route for your clients?

 

[0b1kanobee]

Sounds like a recipe for disaster. These are the kinds of things that give annuities and reverse mortgages a bad name. Good catch Norwayguy.

 

[Josh]

Is the guy looking to take out the reverse mortgage so that he can get out of paying the mortgage for the rest of his life and he needs to use the annuity money to get enough equity in the house to make the numbers work?

The best thing you can do is to call the carrier, with the client, and ask them about the specific contract he has. He might not have any surrender charges left or it might be locked in for good; the carrier will know either way.

To take that a step further, if the contract is annuitized, there might not be any option from the carrier and you'll have to get a loan shark type organization to buy the payments for a lump sum and THAT is probably pretty dirty pool.

 

[fjman]

Nothing about this sounds good!

 

[JAG82]

this sounds like a lawsuit waiting to happen!


hope you got plenty of E&O insurance!