What can be interpleaded
Annuities in Interpleader
Annuities are contracts with an insurance company, and they can be disputed in two ways. Beneficiaries can disagree about who receives a death benefit, and living co-owners can disagree about who controls the contract. Either kind of dispute can lead the insurer to interplead.
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Two kinds of annuity disputes
After a death. An annuity’s death benefit is paid to the beneficiary named under the contract. The usual beneficiary disputes apply, including divorce, an incomplete change, undue influence or capacity, and the slayer rule.
Powers of attorney are a common source. In a Texas complaint, an insurer alleged that after the owner’s wife, the primary beneficiary, died, an online beneficiary change kept her as primary beneficiary but replaced the contingent beneficiary with another person. After the owner’s death, the original contingent beneficiary contested the change. The insurer’s review found that the change had been submitted not by the owner but by that other person, under a Colorado durable power of attorney that “did not appear to grant” authority to change beneficiaries, as Colorado law requires. When told the change could not be processed, that person alleged that the original contingent beneficiary had been named only through undue influence or elder abuse.1 complaint (PDF)
A change that follows the contract’s procedure will usually stand. A federal decision applying Delaware law enforced an annuity beneficiary change that strictly complied with the contract. Whether an agent may name himself is a separate question; in a Vermont annuity dispute, the court treated such a change as a self-dealing transaction under the state’s power of attorney statute.
Between living owners. An annuity can have more than one owner. If co-owners separate, or one accuses the other of signing a withdrawal request without authority, the insurer may face two inconsistent instructions. That is a classic setting for interpleader.
Ownership itself can be challenged. In a 2026 Texas complaint, an insurer alleged that an agent holding a durable power of attorney for another person applied for an annuity naming herself as owner and annuitant, and paid the $1.5 million premium with a check that the insurer said was, on its face, “generally consistent with” the power of attorney. The trust of the person who granted the power was the death beneficiary. Over the next two years the agent made two withdrawals and changed the beneficiary to someone else. About five months after that change, the person who granted the power, or someone acting for him, told the insurer the agent had stolen the $1.5 million, and demanded the funds. The insurer stopped all withdrawals and interpleaded under Rule 22. It offered to deposit the money but noted that the contract is “an appreciating asset,” so “the rightful owner of the funds may be prejudiced by a deposit at this time.”2 complaint (PDF)
Federal tax timing rules
To be treated as an annuity for federal tax purposes, a contract generally must provide that if a holder dies before the annuity starting date, “the entire interest in such contract will be distributed within 5 years after the death of such holder,” and if the holder dies after payments have begun, the remainder will be paid “at least as rapidly” as before.3 There are exceptions, including payment over a designated beneficiary’s life when payments begin within a year of death, and special rules for a surviving spouse.3
These rules do not decide who the rightful beneficiary is. But a long dispute can complicate the payout options available, which is one reason to raise questions with the insurer promptly.
Annuities in employer plans
An annuity provided through an employer retirement plan is often governed by ERISA, including its survivor benefit and spousal consent rules. See retirement accounts.
How courts have ruled
- Facts
- In 2004, a couple bought two annuities as co-owners. After they separated, one co-owner submitted a request to surrender the larger annuity, which was then worth $43,707.51. The request appeared to bear both signatures. The other co-owner later said by affidavit that her signature on the request and on the check had been forged, and the bank returned the money to the insurer. The insurer asked the co-owners to settle, received no agreement, and filed an interpleader under 28 U.S.C. § 1335. A second insurer interpleaded the smaller annuity.
- Holding
- The court found the first insurer "was justified in bringing an interpleader action," discharged it from further liability, barred the co-owners from suing it over the annuity funds, and allowed it $5,860.97 in fees and costs from the funds. The court also granted the second insurer's motion for discharge.
- Why it matters
- An annuity dispute does not need a death. A credible forgery allegation between co-owners was enough for the insurer to step aside and let the court decide, and the fee award came out of the disputed money.
Talcott Resolution Life Ins. Co. v. Carlyle, No. DKC 19-1796 (D. Md. June 29, 2022) (memorandum opinion).
- Facts
- An annuity's death benefit of $605,283.77 was payable to the decedent's daughter, the named primary beneficiary. His estate claimed it instead and sued the insurer, which counterclaimed in interpleader against the estate and the daughter. The daughter could not be found, was served by publication, and never appeared.
- Holding
- On an unopposed motion, the court entered default judgment against the daughter, holding that she "has forfeited her right to pursue an interest in the Death Benefit." It approved an agreed $9,000 fee for the insurer, ordered the rest deposited, and discharged the insurer. In a later order, on the estate's unopposed motion, it ordered the fund paid to the estate.
- Why it matters
- Annuity death benefits are interpleaded the same way as life insurance. A named beneficiary who does not respond can lose the benefit by default, without any ruling on the underlying dispute.
Estate of Budinski v. AAA Life Ins. Co., No. 2:25-cv-10964-TGB-EAS (E.D. Mich. June 23, 2026) (amended order, ECF No. 24), court order (PDF); disbursement order (Aug. 21, 2026, ECF No. 25). Full summary.
Related
Footnotes
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Complaint in Interpleader ¶¶ 6–15, USAA Life Insurance Co. v. Schneeman, No. 3:21-cv-00169 (S.D. Tex. filed July 2, 2021), ECF No. 1. Allegations only. ↩
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Complaint for Interpleader ¶¶ 6–18 & n.1, Athene Annuity & Life Co. v. Hope, No. 1:26-cv-01374 (W.D. Tex. filed May 22, 2026), ECF No. 1. Allegations only. ↩
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26 U.S.C. § 72(s)(1)–(3). Cornell LII. ↩ ↩2