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Monday, June 13, 2011


Even an old goat like myself can learn something new (several times a day, as a matter of fact).  Until today, I did not know there was such a thing as the Death Master File.  Although one may think this is one of Satan's nefarious databases, rather, it is issued weekly by the Social Security Administration (SSA).  Hey, wait a minute (kidding).  How is this file used?
Well, this is very clever.  Turns out John Hancock was brilliantly both using, and not using, the database to boost its profits.  Here's how:  John Hancock sells both life insurance and annuities.  Annuity companies are anxious to find deceased owners of annuitized contracts because then they can stop making payments; most annuitized income streams end at the death of the annuitant (unless more intelligently structured which, unfortunately, most aren't).  So Hancock was using the list to find people to whom they could cease writing checks.  That's how they used the list.
The way they chose to not use the list was for finding deceased life insurance owners.  Until the state of Florida caught them.  Suppose, for example, your late uncle owned a paid up life insurance policy naming you as a beneficiary.  Oregon, and virtually all other states, require all known unclaimed property to be reported to the State, even as little as twenty cents!  Hancock simply chose not to know.
So how would you know?  If no one could find the policy, who would know whether or where to submit a death claim?  And the policy was paid up so there would be no check register entries to clue you in.  Since Hancock already has the Death Master List, wouldn't they use it to the benefit of their customers, to notify the beneficiaries of the policy's existence?  I guess not.  As a result, millions of dollars of potential life insurance claims ended up as unclaimed property.  So Hancock agreed to set up a $10 mil. fund to pay past claims.  To be fair, Florida Insurance Commissioner Kevin McCarty believes this is a pervasive industry practice not John Hancock's exclusive scheme.  And, you can use the National Association of Insurance Commissioners' website to see if your newly departed had a life insurance policy.  I have no idea how reliable it is.
How can you prevent this from happening to your family?  (In Oregon there is over $350 mil. in unclaimed property which, by the way, earns interest that is paid to the Common School fund.)  Get one of my Getting Your Estate in Order booklets (have to come meet with me; too heavy to mail), which includes a complete financial records data sheet.  Or, simply get your will done and include a Letter of Instruction listing the locations and contact info. for all important policies, advisers & documents.  After all, the devil's in the details.

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