Advisor failed to disclose pitfalls of variable annuities
Dear Liz: I recently purchased a variable annuity. I researched the investment only after the fact and discovered that my new advisor had not disclosed its pitfalls. I came to him with all my questions afterward, but he was defensive and unprofessional. I feel completely deceived! Do I have any recourse? I feel like I made a huge mistake.
Answer: The fat commissions that many annuities pay can tempt unethical or poorly educated advisors into painting an unrealistically rosy picture of these financial products. Variable annuities are complicated, combining investments with an insurance component, and often come with high fees and surrender charges that make them an unsuitable option for many investors.
“Unsuitable” is the word you need to remember when you report this salesman’s behavior to the insurance company and to your state’s insurance commissioner. In the letters that you write to both entities, make it clear that you weren’t informed of the annuity’s disadvantages and outline how the investment is not a suitable choice given your needs. Ask that the annuity be “unwound” and your money returned. If you don’t get satisfaction from either the insurer or the commissioner, you may need an attorney’s help.
Dear Liz: I recently lost a rental property to foreclosure, and the lender is after me for the difference between what I owe and the sale price of the property (roughly $58,000). If I am sued, is there any way to get out of this debt without paying?
Answer: If you are sued by this or any other lender, you should consult an experienced bankruptcy attorney about your options. If you can’t afford to pay a deficiency judgment — the difference between what you owe and what the property is worth — bankruptcy could allow you to erase or reduce the debt.
Although some states, including California, protect homeowners from such lender lawsuits, the protection does not extend to rental or commercial property. It can also be waived, inadvertently or otherwise, when a homeowner signs lender documents to arrange a short sale. Anyone who is selling an underwater home or who is in danger of losing one to foreclosure should discuss the situation with an attorney familiar with real estate and bankruptcy laws.
Dear Liz: I recently read your article about why gift cards aren’t really gifts. Now I know I am not the only one who feels that way. I seldom give gift cards, especially at Christmastime. Whenever I have, I haven’t really felt good about it. I like the thinking and planning it takes to find a special something for someone. My two grown sons love gift cards, but I am trying to get them to see that it is shallow giving indeed. Yes, it is difficult finding a gift for someone sometimes, especially of the opposite sex. That’s why in my family I always insist on a Christmas list with at least five items. It helps. Thanks again for putting into words so wonderfully what I had been feeling about gift cards.
Answer: Many people love to give and get gift cards precisely because they circumvent the thoughtfulness and planning you so enjoy. But others use them to cope with near-impossible gift situations, such as the following:
Dear Liz: I have to disagree with you on the gift cards. When you have a mother-in-law who responds to “What would you like for Christmas?” with a list of things not to buy, I think a gift card is in order. I have often taken the “not to buy” list and worked from that, but usually what I buy her then ends up on next year’s “not to buy” list. If not gift cards, then what?
Answer: How about a donation to a charity in her honor? She’ll hate it just as she hates every other gift you’ve gotten her, but at least you could get a tax deduction for your trouble.
Liz Weston is the author of the upcoming book “The 10 Commandments of Money: Survive and Thrive in the New Economy.” Questions for possible inclusion in her column may be sent to 3940 Laurel Canyon, No. 238, Studio City, CA 91604 or via the “Contact Liz” form at asklizweston.com. Distributed by No More Red Inc.
