Problems with jointly owned deferred annuities

Every so often, I get a call from an attorney or agent about a  deferred annuity that someone decided should be owned in joint tenancy with right of survivorship (JTWROS). Sometimes, there’s no serious problem. Sometimes, there is. Occasionally, the problem is beyond fixing. 

Example: An attorney in AZ called me a few years ago, wanting to hire me as an expert witness. His client, Barbara, wanted to sue an insurance company and the agent. She and her husband had bought a deferred annuity and because almost everything else they owned was in joint tenancy, they decided that the annuity should be as well. The agent did not advise otherwise, and the insurance company issued the contract that way. 

The husband died. Barbara contacted the insurer with a request to surrender the annuity which, she thought, now belonged to her (as surviving joint tenant). The reply she got shocked her and sent her to the attorney. The insurer explained that the beneficiary named in the annuity was the couple’s church and that the death benefit would be payable to that church. 

When I spoke with the attorney, he insisted that the insurer didn’t understand the law. “Property held JTWROS always passes to the surviving tenant, by operation of law,” he said. “Yes,” I replied. “But annuity death benefits do not pass by operation of law, but by contract. And the contract states that at the death of any owner, the death benefit will be paid to the named beneficiary. In this case, that’s the church.” There was nothing Barbara could do other than request that the church leadership make a qualified disclaimer.