What to do when a Midland National account holder dies

Completely different, down to the address on the envelope. Life claims go to the Life Division: phone 800-733-2524, fax 877-841-6706, email claims@sfgmembers.com, mail to P.O. Box 5973, Sioux Falls, SD 57117. Annuity claims go to the Annuity Division: phone 877-880-6367, fax 877-586-0249, mail to P.O. Box 10385, Des Moines, IA 50306-0385. (877-586-0244, the number on the public contact page, is general annuity service, not annuity claims.) The forms differ too — life uses claimant statement 13945-2 with 3864-1; annuity uses claimant statement 14497Y with the Financial information guide for beneficiaries 9339Y. The substance differs most of all. A life death benefit is paid out. An annuity can be CONTINUED: settlement Option A on form 14497Y is spousal continuance, available only to the deceased owner's spouse who is the sole primary beneficiary, and it makes the spouse the new owner of the contract with all its benefits intact. A non-spouse beneficiary can elect a lump sum, an annuity payment plan, a non-qualified stretch over life expectancy on a non-qualified contract, or an inherited IRA. Sending an annuity claim to the life address, or assuming the only option is a check, are the two most common mistakes here.

The claimant statement, the death certificate, and a Certification of trust agreement — form 7519 for a life policy, form 19306Y for an annuity, form 26742Y if an annuity is payable to a charitable trust. The certification establishes the trust's existence, identifies the trustee, and proves the trustee's authority to receive the proceeds without handing Midland National the entire trust instrument. Then there is the requirement that catches ILIT trustees off guard: on a LIFE policy, when the proceeds payable to the trust equal or exceed $250,000, Midland National also requires a NOTARIZED Generation-Skipping Transfer Tax Release, form 12973. Because most policies actually held in an irrevocable life insurance trust are well above that line, plan on the notarized GST release being part of the claim from the start rather than discovering it three weeks in. The annuity claim form adds a trustee indemnification: the trustee signing it releases and holds Midland National harmless from claims arising out of the sale or administration of the contract to the trust, certifies that the product is suitable for the trust's purposes, and accepts that any consequence of an error in interpreting the trust is borne by the trustee.

Ownership changes at Midland National are a paper transaction on the Non-financial change request, form 19513R, section 4. Both the current owner AND the new owner — the trustee — must sign, and a copy of the Certification of trust agreement must accompany it when the new owner is a trust. Midland National runs Patriot Act verification on the proposed owner, so a legible copy of a driver's license, passport, or other identifying document is required for each new owner, and the form states that any ownership change is subject to its underwriting rules in force at the time of the change. Two state-specific signatures show up on the same page: if the current owner lives in a community property state (Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin), Midland National recommends the spouse sign to document consent, and states that without that signature it may presume no community property interest exists and has no duty to inquire further; if the current owner lives in Massachusetts, a disinterested witness — anyone other than a designated beneficiary, and not the agent — must sign. The federal timing rule is the one that decides whether the transfer works: transferring an EXISTING policy starts the three-year lookback of IRC § 2035, so if the insured dies within three years of the transfer the death benefit is pulled back into the taxable estate. Having the trustee apply for and buy the policy inside the ILIT from the start avoids that clock entirely. Midland National does not draft ILITs. Consult a licensed attorney before transferring policy ownership.

When no beneficiary is named, or no named beneficiary survives the insured, the life claim kit says the proceeds are payable to the estate of the insured or policyowner under the policy provisions — which puts the money through probate. To collect, the executor or administrator completes the claimant statement, supplies a court certificate of appointment, and obtains a SEPARATE tax identification number for the estate: Midland National treats the decedent and the estate as different taxable entities, so it will not pay the estate until the estate has its own EIN. If the beneficiary is a minor or an incompetent person, the court-appointed guardian of that person's estate must complete the claimant statement and supply a court certificate of appointment. And if no legal guardianship is established, Midland National states that on a life policy it will HOLD the proceeds at interest until the minor reaches the age of majority — the money is not released to a parent on request. Naming a trust, rather than a minor or the estate, is what avoids both outcomes. One more path an executor should know about: funeral homes can be paid directly by assignment, using the funeral home's own assignment form signed by every beneficiary plus an itemized funeral bill, and Midland National mails a separate check to the funeral home.