A New Jersey resident is suing an advisor, a financial planning firm, two insurance companies and other parties over the poor performance of a life insurance arrangement that involved the use of premium financing.
Joseph Monte, the plaintiff, says Brian McGeehan, a financial advisor with Creative Financial Group, misled him about the state of the arrangement when he asked about it and failed to use a 1035 exchange to move him into policies that would have reduced his exposure to risk, according to a complaint Monte filed Aug. 22 in a New Jersey state court in Monmouth County, New Jersey.
The arrangement: In 2021, McGeehan helped Elaine Monte, Monte's wife, use an irrevocable trust to buy a $7.5 million whole life policy from MassMutual Insurance Company, an affiliate of Massachusetts Mutual Life Insurance Company.
The policy was supposed to have a $300,000 annual premium for seven years. Joseph Montes knew about 1035 exchanges, because he used a 1035 exchange valued at $630,000 from another life insurance policy to help pay for the $7.5 million policy.
Elaine Monte also acquired a life insurance policy with a $10.5 million death benefit that was issued by Penn Mutual. That policy was supposed to have annual premiums of $700,000 for seven years.
The Montes used premium financing to buy the policies.
Post-purchase performance: When Joseph Monte asked McGeehan in 2022 about the impact of rising interest rates on the MassMutual policy, McGeehan provided "unofficial marketing materials and spreadsheets" rather than carrier-approved ledgers that would show how the policy was really performing, Joseph Monte alleged in the complaint.
"There was no disclosure to Monte that the premium financed spreadsheets presented to him were invalid without the full insurance illustrations and act only as supplemental projections," Monte said.
McGeehan could have used a 1035 exchange to move the Montes into policies that would have eliminated market risk, refinancing risk, collateral risk and lending-rate risk, according to the complaint.
Instead, Joseph Monte transferred $640,741.46 into the MassMutual policy at the beginning, paid about $100,000 in interest in 2023, let the policy lapse and and ended up getting just $50,000 in cash value, Joseph Monte alleged in the complaint.
The suit: The list of defendants in the Monte suit includes McGeehan, Creative, MassMutual Insurance Company, Penn Mutual and U.S. Bank.
Monte has accused McGeehan of negligent misrepresentation, breach of fiduciary duty and professional negligence.
He has accused McGeehan and Creative of violations of the New Jersey Consumer Fraud Act, unjust enrichment and common law fraud.
He has accused MassMutual, Penn and U.S. Bank of negligence, in connection with allegations that they failed to ensure that McGeehan and Creative had advised him properly.
Representatives for the defendants could not immediately be reached for comment.
Seth Rosenstein, an attorney for Joseph Monte, said his firm does not comment on the details of pending litigation.
"More generally, we are committed to holding financial advisors and insurance agents accountable when they mislead clients and push products that enrich themselves at the expense of consumers," Rosentein said in an email. "Clients deserve transparency and advice that serves their financial well-being, not the financial gain of trusted professionals."
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