Paying Insurance Proceeds with a
"Checkbook" Instead of a Check

Bill of Rights for
Retained Asset Accountholders

When Retained Asset Accounts were invented in 1983 after extensive research into the needs of beneficiaries by Gerry Goldsholle, then a Vice-President at MetLife ®, he built into the design of the program, trademarked as the "Total Control Account," ® provisions to make sure that every life insurance beneficiary would be at least as well off, and almost always far better off, if paid through a Retained Asset Account by means of "a checkbook instead of a check" than having been paid with a single lump sum check or draft. 1

Over 120 additional insurance companies (according to Bloomberg) have since created their own versions of Retained Asset Account programs since that time. Unfortunately not all insurance companies operating Retained Asset Account programs have chosen to follow the example the program’s inventor began that assured all beneficiaries would be better off having been paid through the Retained Asset Account with "a checkbook instead of a check."

Based on Bloomberg's reports and the experience of Advocate Law Group attorneys, it seems that some of the insurance companies adapting the original program didn't adopt the principles of the original program. Some couldn't even copy straight, some were careless, and other companies seem clueless. As times changed, even companies that initially took pains to put beneficiaries' interests ahead of, or at least on a par with their own, have slipped. Now, instead of wearing a halo, some may be wearing horns at times, taking advantage of Retained Asset Accountholders.

The time has come for a Bill of Rights for Retained Asset Accountholders. All insurance companies should operate their Retained Asset Account programs so that each Retained Asset Accountholder is and will continue to be better off having been paid through a Retained Asset Account than if payment were made with a single lump sum check. That is why Advocate Law Group P.C. is proposing a Retained Asset Accountholder’s Bill of Rights, to be enacted into law or required by insurance regulators if all insurance companies do not voluntarily agree to adopt it to assure better protection of Retained Asset Accountholders and their families.

Every Retained Asset Accountholder has the right to a clear and simple explanation of the Retained Asset Account. The terms and conditions of every Retained Asset Account should be clearly set out in an easy to understand written document.2 Material terms should be set out in a clear and conspicuous manner. The insurer may not change any terms and conditions of the Account unless the  accountholder consents after receiving full and clear disclosure.

Retained Asset Accountholders have the absolute and immediate right to write a single "check" to remove the funds from the Retained Asset Account. The right of the Accountholder to do so immediately on receipt of the checkbook should be set forth clearly and conspicuously in materials sent to the Accountholder.  The earliest Retained Asset Account material sent to beneficiaries did that, and also included diagrams showing how they could do so. The Retained Asset Accountholder should also have the right to ask that the insurance company close the Retained Asset Account and promptly forward a single check for the entire remaining balance, together with all interest accrued to date.

Retained Asset Accountholders have the right to be paid a competitive rate of interest - tied to an outside index -- as long as funds remain in the account. The interest rate the insurer pays to Retained Asset Accountholders should always be at least equal to (and preferably higher than) an objective outside index of money market rates. The insurer’s commitment to pay highly competitive rates should be set forth in the Account’s terms and conditions. Insurers should also be encouraged to pay higher rates on a tiered basis (such as X% per year on the first $50,000 and X+0.25% on amounts in excess of $50,000) and/or provide bonus interest rate incentives (such as an extra 0.25% interest on funds remaining on deposit in the Account at the 6 and 12 month anniversaries). The rules for tiered rates and bonus or incentive rates should be clearly specified in the Account material.

Retained Asset Accountholders have the right to be paid continuous interest. Insurers should be paying interest to beneficiaries from the day the Account is established by the insurer, and continue to pay interest so long as funds are in the Account.  That assures the beneficiary will be earning interest immediately - even while the old single check would have been in the mail. While this involves some cost to the insurer, it also assures that beneficiaries are always better off than they would have been with a check. The insurer may reserve the right to close accounts whose balance falls below a reasonable minimum threshold, but should still be obligated to pay interest until closure.

Retained Asset Accounts should be provided free, without any charge to beneficiaries for establishing, maintaining or closing the Retained Asset Account. There should be no charges or fees for normal account actions, such as receiving statements, ordering checks or drafts, etc. Extra-ordinary services, such as placing "stop payment order," should be provided at reasonable fees.

Retained Asset Accounts should automatically be sent monthly statements by mail for at least the first year. Beneficiaries tend to be distraught and a large percentage of all beneficiaries are elderly. Such circumstances make people more susceptible to becoming victims of financial abuse by caregivers and others. A written statement every month for the first year reminds beneficiaries of the Account and the proceeds in it, and any withdrawals easier to spot. Written statements should be mailed thereafter anytime a check is written or charge made, but not less than quarterly. While beneficiaries should be able to affirmatively opt for receipt of electronic vs. paper statements at some point, the mail should be used initially. The use of paper statements would help alert caring family members and their trusted advisers to uncover such abuse.

Beneficiaries should be sent photocopies of every check they write. This also is an important step to help prevent financial abuse, and should be done by mail unless the beneficiary elects to have copies sent electronically. Electronic copies should be maintained and made available for at least 6 years from the date the Retained Asset Account is closed.

Retained Asset Accountholders should be permitted to elect all other settlement options available under the original life insurance policy.  The first Retained Asset Account specifically granted beneficiaries the right to elect all other available settlement options in their policy, and any other available settlement options, so long as any money was in the account.3  At the very least, preserving beneficiaries rights to do so for one full year is in order. 

Retained Asset Accountholders should have interest credited to the Accounts at least monthly basis. Accountholders should be able to see how much interest their funds have earned every month.

Retained Assets Accountholders have the right to expect all material sent to them will be truthful. All statements made to the Accountholder by the insurer or its agents about the Account shall be truthful, and free from any omissions of material facts that would make any of the statements made by the insurer or its agents misleading. The Account materials should specify that the "checks" are "drafts" on funds held by the insurance company issuing the Account, and any bank whose name is shown on the account is only acting as an agent for the insurance company.

Retained Asset Accountholders have the right to have the insurer treat the funds in the Account as the exclusive property of the Accountholder.  The original Retained Asset Account program created a Chinese wall, precluding other parts of the insurance company from trying to glom onto the money in the Retained Asset Account, even if the insurer concluded that the life insurance benefits were paid in error. Some companies never erected such a wall, and others that initially walled off access stopped doing so, enabling other company units to unilaterally withdraw funds from a beneficiary’s Retained Asset Account. Companies should not be permitted to access the accounts or limit an Accountholder’s access to the funds without court order -- even if the insurer may be convinced that it had been defrauded.

Retained Asset Account materials should clearly specify who guarantees the funds in the Retained Asset Accounts and for how much.  All funds in the Retained Asset Accounts should be the ongoing obligation of the insurance company that issued the policy, and fully guaranteed by that insurance company.  All Retained Asset Accounts should also be protected by the accountholder’s State Life Insurance Guarantee Association. The life insurance companies should specifically tell accountholders there is State Insurance Guarantee Association protection rather than FDIC or SIPC coverage, and explain the  coverage limits applicable to the accountholder. Current the limits vary from $100,000 to $500,000 depending on the state. Historically insurance companies have been precluded from even mentioning that they have backing from State Life Insurance Guarantee Associations in most states; that should change.

Retained Asset Accountholders should be able to rely on the life insurance company to make them whole if there is any error abuse connected with the Account. The life insurance companies issuing Retained Asset Accounts often contract with banks and other servicers to process the checks or drafts used to withdraw funds from the accounts, maintain records, send out statements and various other administrative functions. In the event of any problem with a Retained Asset Account, such as a stolen check or improper withdrawal, the beneficiary should be able to look to the life insurance company to handle the matter rather than force a beneficiary to deal with the insurer’s bank and administrative servicers. The life insurance company should also make accountholders whole in those circumstances a bank would have made a similar depositor whole.
1 The very first Retained Asset Account was named the "Total Control Account," on the recommendation of Thomas J. DeBow Jr. of DeBow Communications, Ltd. ( New York City, and later trademarked by MetLife®. Care was taken that the account always be described as the beneficiary's Total Control Account, as it was the beneficiary who exercised total control, not MetLife. It also embodied the inventor’s intent that the beneficiary’s interests are paramount when it comes to the Retained Asset Account, and was intended to convey a specific message both to beneficiaries and insurance company employees.

2 Simplicity and clarity was the objective of the very first Retained Asset Account program. In contrast to insurance company policies and other documents that were and still are nearly incomprehensible, the "customer contract" provided to beneficiaries of the first Retained Asset Account was written in plain language, using a simple and easy to understand Question and Answer format. It was also the very first insurance company contract ever written in an easy to follow Q&A format. 

3 The original MetLife program also gave beneficiaries the additional option to select from a range of a Guaranteed Interest Certificates (akin to bank certificates of deposit).

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