How to Unwind 412i

[scagnt83]

just to update folks

ive contacted the insurance company. the plan is even set up worse than i thought...bc the annuity is also paid monthly there is a 5% charge on that as well and thus i also lose money every year on the annuity portion alone.

fortunately the agent had sent me an email saying how great of a deal this is to get the WL for so cheap (so i have documentation) saying i could end the plan after 3 years for the NITR value (which isnt true of course) and they are deciding with how to deal with this issue.

does anyone know if there is an irs issue for just ending the plan after 1 year?

If there is my other thought are to have them reduce the defined benefit every year (making almost no contributions on the next few) until i get to the point where i can safely terminate the plan.

You need to find a good Tax Attorney to represent you in this matter, along with an independent agent who has experience in this field.

If their really was gross misrepresentation, then a civil attorney experienced in insurance litigation might be in order.


I have no idea what was or wasnt said, and if the product truly was misrepresented (Im not doubting you; it sounds like it probably was, but I know from experience that clients forget a lot of what was talked about a year+ later).

But if it was misrepresented to the extent that you claim, then you might have cause to be compensated for any direct loss or indirect loss (lost opportunity of gains).

I will say that if your ultimate goal behind purchasing the 412i was to pay for college and special needs costs associated with your kids, then the 412i was most likely not an appropriate choice.

The email you can produce is pretty damning evidence. Any documented misrepresentation is a strong piece of evidence on your side.

My goal (if I where you) would be to recoup from the company: premiums paid plus a minimum of 4% compounding (preferably 5%), any IRS fees/penalties/taxes, and any professional fees that you have to pay in the process to lawyers or other advisors.
But of course this is only if the product was grossly misrepresented, structured, or administered.
(They might even agree to this with just the mention of contacting a civil attorney)

Again, what company is it with?
Someone on here might very well have experience with 412i plans with this company, or at least have access to some more in depth info about the specific plan (features can vary from company to company).
You will not be badmouthing them, because really what you are claiming is that the agent misrepresented the product, not the company. (plus companies get badmouthed on here by us agents all the time... lol)


Any way you go about it, you need an advocate on your side who is experienced in both tax law and 412i plans.
So this means that you will probably have to find two different advisors to help represent you (the tax attorney and an independent agent).

 

[BNTRS]

Any way you go about it, you need an advocate on your side who is experienced in both tax law and 412i plans.
So this means that you will probably have to find two different advisors to help represent you (the tax attorney and an independent agent).

You're going to need a state wide, perhaps interstate wide search for this combination


What the attorney will most likely look for is an expert witness--the agent scagnt speaks of--who is well credentialed (e.g. Charted Life Underwriter, Chartered Financial Consultant, Certified Financial Planner, Charter Pension Consultant [rather rare]) who can testify to the suitability of the recommendation and design of your plan.

This may be easier to prove an error or omission than one might think. They'll likely subpoena the agent's client file, which will look for documentation on client's stated goals and objectives, if the agents doesn't have anything, he or she is already in deep -----.

 

[YouGotMyMoney]

Is it bad that I thought the title of this thread was "How to unwind on 420"?

 

[rex]

i completely understand that nobody here should just take my word for what happened and i thank you for your excellent post on info.
the company is guardian.
i worry about what he puts in the file although im pretty sure he put in there i could get the insurance for the nitr at 3 years since that email is also cced to a person at guardian. He didnt put the dollar amount of the nitr in that email but he clearly spells out nitr and 3 years. the reason i worry that he is dishonest with his files is bc in his emails to me he likes to say we really wanted to get guarantees and i high deduction. i never said that. i asked for the best plan which of course is vague but i wasnt informed to the level i am now. he purposefully made me think a high deduction gave a higher level of return. i have corrected him in the past saying i dont want guarantees but he will then say who doesnt want guarantees when its the best option...the guarantee is an added bonus. his files should say that i asked for a plan that would help my kids avoid the situation i was in where i had no choice but to join the military in order to pay for college since that is my direct quote to him. i love the military but just want them to have another option. obviously it has worked out for me but it was a very long and difficult road.
again many thanks.
i dont know what how to unwind on 420 means although i assume its a joke of some sort.
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i guess my additional questions are what could be real motives for me to want to start a 412i with whole life that actually loses money even on the annuity when i have zero in the bank, a new house with just 5% paid off, kids with high expenses, and a company im not sure ill keep for more than a few years? im just curious what could his real argument be for such a plan?
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finally any value in contacting a state agency or is this overkill or worthless?

 

[Franz Kafka]

i completely understand that nobody here should just take my word for what happened and i thank you for your excellent post on info.
the company is guardian.
i worry about what he puts in the file although im pretty sure he put in there i could get the insurance for the nitr at 3 years since that email is also cced to a person at guardian. He didnt put the dollar amount of the nitr in that email but he clearly spells out nitr and 3 years. the reason i worry that he is dishonest with his files is bc in his emails to me he likes to say we really wanted to get guarantees and i high deduction. i never said that. i asked for the best plan which of course is vague but i wasnt informed to the level i am now. he purposefully made me think a high deduction gave a higher level of return. i have corrected him in the past saying i dont want guarantees but he will then say who doesnt want guarantees when its the best option...the guarantee is an added bonus. his files should say that i asked for a plan that would help my kids avoid the situation i was in where i had no choice but to join the military in order to pay for college since that is my direct quote to him. i love the military but just want them to have another option. obviously it has worked out for me but it was a very long and difficult road.
again many thanks.
i dont know what how to unwind on 420 means although i assume its a joke of some sort.
- - - - - - - - - - - - - - - - - -
i guess my additional questions are what could be real motives for me to want to start a 412i with whole life that actually loses money even on the annuity when i have zero in the bank, a new house with just 5% paid off, kids with high expenses, and a company im not sure ill keep for more than a few years? im just curious what could his real argument be for such a plan?
- - - - - - - - - - - - - - - - - -
finally any value in contacting a state agency or is this overkill or worthless?

For the last time, 412i is a defined benefit pension plan. Being a veteran, you should know what a pension plan is. Pension plans are REQUIRED to have guarantees. You can't have a 412i plan without guarantees.

If the agent hasn't told you that it was a pension plan, sue. If he/she has told you that it was, then a common sense should have told you that it was not meant for funding your kids' college.

412i is an excellent pension plan. Guardian 412i is an excellent pension plan. If you didn't want a pension plan, then - again - you should sue. My personal feelings are 99.99999% sure that you knew it was a pension plan and you wanted one and now you don't want one any more. JMO

 

[scagnt83]

In all fairness, what percentage of the population can tell you exactly what a pension plan is, how it works, and the rules/regs that come with it??

Not many.

I have spoke to people who are actually receiving pension benefits that have no clue how they work or what they have. All they know is that thy get money from it.

If this guy was 50+ then he should probably know what one is and how it works; but the under 50 crowd definitely is not very knowledgeable when it comes to pension plans.

But, since it is a pension plan, this guy should know all about them since one was sold to him.

But then again, it certainly wouldnt be the first time that a client changed their mind and tried to squeeze out of a former financial decision...
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Also, I second Guardian as being an excellent company with excellent products.

But being an excellent product does not make it the right product necessarily.
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i dont know what how to unwind on 420 means although i assume its a joke of some sort.
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Obviously you didnt go to college! Or if you did you actually studied! ... lol

Its the international pot holiday/slang term for pot.

You might need some 420 after you go through unwinding this 412i!! lol

 

[rex]

im not sure why u think vets know about pension plans...unless u retire from the military u do not get a cent. they have a tsp prg which i did participate in (20k) but that is a dc plan.

im not asking to explain what a 412i is but just how to get out of it correctly.

what i didnt know, is that first off i lose money on the annuity and whole life that is greater than the returns based on funding it monthly. what i also didnt know is that a 412i is really for a different group of people which i think is especially important since mine has a negative rate of return on even just the annuity part. that may not be a big deal if u plan to retire in a few years bc of the deductions and then a lower tax rate but for me it is a big deal. dont u think he should have mentioned that. i didnt realize that the only way to not lose money is to in essence this year both pay for 2010 contributions and also have the 2011 paid for (about 160k which is 80k more than i have) but then of course i dont have 24 months of deductions so i still dont have a way around that either. the biggest prb i have is that i dont plan to have a business greater than 3-5 years and he knew that. my prb is that he told me i could purchase the whole life out of the 412i for 34k at 3 years which is about 1/3 of the amount paid to date. if that were true it could negate some of the lost money mentioned above but since it is a complete fabrication, it is a prb. i dont have the money to pay the 80k per year and then at the end of the year buy it out for 100k at 3 years. thus i need to find a way to modify or kill the plan. im 9 months into this and i started asking these questions at about month 3 (i had some basic questions before we started but in hind site i just didnt know what to ask and was a complete fool) and was given a song and dance about how i was very lucky i could buy the whole life out for 1/3 the cost and i was crazy for being upset with him. of course i felt bad and went away for a while but then learned he is either misinformed or purposefully lying to me. its not that i dont understand i have a pension plan, its just the 412i has strings attached that i was not aware of and make it such that ill likely lose a lot of money. if i had a regular pension plan then when my company ended i wouldnt have to buy out the whole life. i would be at risk for market swings of course that could greatly increase my contribution required for a particular year but there would be a chance of making money and likely the amount would be lower than the amounts currently required to stop losing money in my 412i and buy out the whole life. its a cash flow prb. currently the only way i make money is if i die.

i purposefully didnt mention guardian before. i was asked twice to list the company. im not actually blaming the company at this point, just the agent. i have term and disability with them as well and i think the disability is a very good product. i think the whole life is fine although on the expensive side. The annuity is a rip off since it loses money based on monthly funding but thats just my situation. i think the term needs to go away and i need to use usaa. i was only doing it as a favor to the agent since i thought he had my best interest at heart. as u can tell, i dont feel that way any more. he probably feels differently or he really is a criminal. i have no idea which one is true.

im not saying i was a smart guy. i made a very bad decision and just want help getting out of it. i mean really what about my situation would make u as an advisor pick 412i as the best plan for me? i cant think of anything other than my current income at this point but maybe u have other thoughts. as i mentioned above, im not unhappy at all if people think there is a chance im not projecting the truth. i can understand their concerns but again what is the best way to end this so i can get back on track. im sorry i mentioned guardian and would like to focus on the potential of removing myself from a 412i regardless of whose fault it is. you obviously know that i feel it is the agents fault but i dont expect you to have the same conclusion.

 

[BNTRS]

Yup, everyone needs to step back and take a moment, or at least Franz and rex--when it comes to each other.

The issue isn't with the company, they didn't suggest the 412i, the agent did. But telling us who is was helps determine potential courses of action. The good news is, your 412i was set up with one of the major insurance companies (especially in this market) in the industry, not some fly-by-night whole-in-the-wall company that cares less about their reputation. The additional good news is that Guardian has an entire staff of lawyers and accountants specifically hired to help business owners with plans like 412i, and can help in exiting them as well.

The issue of malpractice depends on lots of stuff. As far as additional answers are concerened, I'm not aware of a question you've asked that is still outstanding that anyone here (a normal agent) is qualified to difinitively answer.

If I have missed an unanswered questions, my apologies, and please let me know.

 

[rex]

an additional question....if one had a 2 million whole life policy (outside of a 412i) and didnt want to continue to pay that sort of premium but likely one for 500k poliicy, how does one do that. is it all based on cash value (since mine would have zero) and are u in essence paying a 2nd commision.

thanks for your assistance.

 

[scagnt83]

an additional question....if one had a 2 million whole life policy (outside of a 412i) and didnt want to continue to pay that sort of premium but likely one for 500k poliicy, how does one do that. is it all based on cash value (since mine would have zero) and are u in essence paying a 2nd commision.

thanks for your assistance.

You are usually able to reduce the DB of a WL policy with most any company. You keep the same policy, they just amend it.

No commissions are paid on the reduction.