Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
Morgan Stanley & Co. and a financial adviser defeated a lawsuit accusing them of providing bad advice to three annuity beneficiaries about their options for disbursements.
The beneficiaries said the advice led them to cash out their annuities in a lump-sum payout that caused them to incur nearly $300,000 in tax liabilities.
Judge Paula Xinis of the U.S. District Court for the District of Maryland said the financial adviser, who was a Morgan Stanley employee, breached his duty because he didn’t research the beneficiaries’ disbursement options and advise them accordingly. But Morgan Stanley and the adviser ultimately weren’t liable because the beneficiaries themselves were negligent in failing to read the annuity forms or obtain independent tax advice before opting to get their benefits in a lump-sum distribution, Xinis said in her Jan. 4 decision.
The decision underscores the importance of obtaining appropriate financial advice before making decisions on annuity distributions.
In her ruling, Xinis noted that under Maryland law an individual’s failure to observe ordinary care for his or her own safety acts as a complete bar to recovery.
The beneficiaries had years of prior experience with annuities and access to documents and contracts, which expressly described distribution options in addition to the lump sum distribution. One of them even admitted that had he contacted the annuity companies or consulted his other financial and tax advisers, he would have learned of the other disbursement options, and that failing to do so was imprudent, Xinis said.
David E. Fink represented the beneficiaries. Kutak Rock LLP represented Morgan Stanley and the adviser.
The case is Berkenfeld v. Lenet , 2018 BL 2622, D. Md., No. 1:16-cv-01227-PX, order granting defendant’s motion for summary judgment 1/4/18 .
To contact the reporter on this story: Carmen Castro-Pagan in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Jo-el J. Meyer at email@example.com
Copyright © 2018 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)