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States starting to escheat unannuitized VAs?

I had an interesting conversation with Vanguard today and wanted to pass it along...
My mother has a variable annuity with Vanguard. It is not annuitized and there is no desire for it to be annuitized.
The other day she got a letter from Vanguard stating that unless she took action Vanguard would be annuitizing the VA.
I called up Vanguard and talked to one of their annuity people about this.
The Vanguard rep said that historically Vanguard has not enforced the VA's "commencement date" -- the date chosen back at purchase for when the VA would annuitize. But states have started enacting and proposing laws saying that if a VA is not annuitized on the commencement date, then five years later, some amount of VA escheats to the state (I'm guessing the amount is equal to all the payments that would have been made if the VA had been annuitized).
Therefore, Vanguard is contacting people (don't know if they are contacting all VA holders or just those in states with enacted/proposed VA escheat laws) who are at/after the commencement date and telling them that if they do nothing the VA will be annuitized and that if they don't want that, then contact Vanguard to either defer the commencement date or cash out the VA). In my mother's case she just deferred the commencement date to age 99 (I don't know if that's the latest allowed by Vanguard or her state's law).
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Rich Carreiro                            rlc-news@rlcarr.com
Reply to
Rich Carreiro

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I wonder if, as is all too common, this rep got it a bit wrong. Unclaimed property, after a certain period of time, is supposed to escheat to the state. Before that time, the owner of the property, or heirs, etc. can and should be located. If so, the property is not unclaimed.
In the present situation, the owner is readily known, so there should be no escheat.
However, maybe the state are entitled to some lost income tax, that would have been paid if the VA was annuitized.
Reply to
Pico Rico
"Pico Rico" writes:
That's not quite how it works.
The onus is on you, the account owner, to "speak up" as it were, to avoid escheatment, even if the financial institution knows exactly who and where you are.
I have seen this with relatives and for myself with a bank account that I keep for no good reason and never use.
The financial institution will send written notice as the time of escheatment approaches saying to either make a transaction in the account or send them written notice that you still exist. If you blow that off the property *will* escheat even though you are known and located.
Anyhow, I've been googling around and it appears many/most states have escheatment laws which declare, by definition, that a variable annuity is to be considered "abandoned" and subject to escheatment if it has been N years past the commencement date and no activity has happened in the account.
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Rich Carreiro                            rlc-news@rlcarr.com
Reply to
Rich Carreiro

if they send you a letter and blow it off, they don't know you exist. You are not known and located if you blow it off. All they know is that they have a last known address for you in their files.
Reply to
Pico Rico

The couple of state I have found include "activity" in the account to be "corresponded in writing with the life insurance corporation concerning the policy". So, this is just like "unclaimed" bank accounts - if they send you a letter asking if you still exist, and you respond, there is no escheat.
Reply to
Pico Rico
Does this apply to traditional/rollover IRAs also ?? No additions or withdrawals over some period of time ??
Reply to
Retired

it only applies in the same manner it applies to bank accounts. If they don't have "activity" for a period of time. But that "activity" can just be communication from you, such as a response to their letter saying "are you still there?"
Reply to
Pico Rico

I would think so, but I am no expert here and, more importantly, neither are the financial institutions. But they are supposed to send you a letter when they think you are getting close to escheat status, so make sure you look at your mail (don't confuse for junk mail) and reply to it.
Reply to
Pico Rico
When I was contacted by BofA about this issue a while ago, they said "no" unless the on-line session involved some account activity. Just viewing didn't count.
Since it was a CD -- no actual activity was possible -- I ended up sending them a "balance request" message once a year, even though the balance could be viewed on-line easily.
Whether this is California law, or BofA's policy, or just one their agent's whims, you be the judge.
Reply to
zvkmpw

I wouldn't think that would count as "proof of life" since there is no way to determine who originated the request. For instance, my wife is not internet literate, so I handle all the internet inquiries using the username and password which I set up for her. It would probably take a direct letter, with her name on it, as a minimum to qualify for "proof of life"...
I am surprised that the SS people don't require notarized letters every five years or so, since they send out SS checks directly to the bank, without any definite knowledge that the recipient is still alive. In our case, the checks go to a joint account where either of us can draw on it, and I would think that an unscrupulous person would simply not report the death and continue getting checks ad infinitum....... Just a few thoughts....
Reply to
AndyS

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