Investor Recovers Tax Liability in Annuity Sale


This week, on behalf of an unsophisticated investor who had suffered an enormous tax consequence as a result of the sale of a variable annuity, Green, Schafle & Gibbs settled for a substantial proportion of the tax impact.

Tax Advice & Variable Annuities

The client had held a variable annuity in her account at a major multinational brokerage firm for almost 25 years before liquidating it. Rather than exchange the variable annuity and/or advise her of the potential tax consequence the annuity had accumulated, our client's broker simply executed the transaction without further scrutiny.

While brokerage firms and brokers are not required to give tax advice (and indeed, many of them claim it is strictly prohibited), the tax status of clients and tax impact of certain investments - such as variable annuities that offered tax deferral benefits - clearly forms part of any reasonable suitability analysis.

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