Settlement reached in ‘living trust mill’ suit

American Equity Investment Life Insurance Co. of Des Moines, Iowa, has settled a class action in a Kentucky state court over abusive annuity sales. This $16.4 million settlement will provide relief to as many as 24,000 people who bought the annuities between Jan. 1, 1997 and Dec. 31, 2007. William F. McMurry, an attorney at McMurry and Associates of Louisville, Ky., was the plaintiffs’ lead counsel. According to the suit, Panter v. Tackett, et al., the annuities were sold to the elderly, often with 20-year surrender periods, as part of a living trust. Plaintiffs said that American Equity was running a “living trust mill,” in which agents worked with a marketing firm and local attorneys to persuade senior citizens to buy the trusts out of fear that their assets would end up in probate. Once the clients bought the trust, agents would then masquerade as attorneys to encourage the victims to sell their investments and buy deferred annuities from American Equity, plaintiffs alleged. Under the settlement, plaintiffs will receive payments if they annuitize, with a 2.4% bonus added to the policies’ value. Surrender fees will be waived for those who annuitize immediately. The carrier said it would no longer sell the annuities when it knew the sales leads were generated through the marketing or sale of living trusts. The company also agreed that any plaintiffs who submit a claim form and who were at least 79 at the time of purchase will be able to withdraw up to 25% of the policy’s value annually for the next four years, free of penalties.