Please take this column as a warning.
If you have older family members, it’s essential that they confide in someone — a relative, a trusted financial professional — about their financial affairs. Use this column to start the conversation.
If you’re a senior, please do your family a service and have a back-up plan. You may be perfectly able to manage your finances today, but it takes just one illness or an unexpected accident to change everything.
You don’t want those you leave behind to be left with unanswered questions.
Use what happened to Lilyan Gaudiosi and her family as your motivation.
Decades ago, Gaudiosi, who worked as a Bloomfield Middle School cafeteria cook and aide for 45 years, wanted to make sure she was never a burden on her two sons.
She purchased a life insurance policy from Prudential in 1960. The policy’s $1,000 death benefit and any accrued cash value was meant to cover burial expenses someday.
When she got older, Gaudiosi made her son Anthony and his wife Sandra the executors of her estate.
As part of her planning, Gaudiosi told her daughter-in-law about the life insurance policy.
“My mother-in-law had always told us that we would never have to worry about her in the case of her death as she had a paid-up life insurance policy,” Sandra Gaudiosi said.
Lilyan Gaudiosi died in August 2008 at age 91.
The couple notified Prudential so they could collect on the life insurance policy and settle the estate.
But Prudential came back with surprising news. It said the policy had ‘no money value,’ and it had been surrendered in 1982.
“What do you do? You grieve for your mother and you move forward,” Gaudiosi said.
Fast forward to February 2017.
Anthony Gaudiosi was going through some old paperwork and he found a puzzling letter from Prudential.
It was addressed to his mother, dated December 1981, and it was about her life insurance policy.
“It is our pleasure to tell you that after December 31, 1981 you will not have to pay any further premiums on your Prudential policy number [redacted] in order to receive its benefits,” the letter said. “Death claims or cash surrender values and any other benefits will be determined according to the terms of the policy, just as if premiums were still being paid.”
The couple was confused. Prudential said the policy was surrendered in 1982. Why would Lilyan surrender a policy that was fully paid up?
They went on a mission to learn more.
LOOKING FOR ANSWERS
Sandra Gaudiosi called Prudential and faxed copies of the December 1981 letter.
Prudential responded on March 6.
“According to our records, the policy was surrendered for the cash value in 1982,” the letter said. “This policy has no further value.”
The couple wanted to know more detail, so Sandra Gaudiosi called Prudential. The rep suggested she fax the letter and her questions.
She did on March 14, and she had some specific requests: documentation to show the date of surrender, Lilyan’s signature showing this was her request and the value of the policy. She also asked for proof the cash value was sent, the address where the check was sent, the date it was sent and any other information to show her mother-in-law received payment.
“It does not make any sense that you would send her a letter stating she need not pay any further premiums after Dec. 31, 1981 and then you inform me in your letter of March 6, 2017 to say that it was surrendered in 1982,” Sandra Gaudiosi wrote.
Prudential’s response letter was basically a repeat of the first and offered no further detail.
The couple was willing to accept that the policy was surrendered, but because giving up a paid-up policy made no sense to them, they asked for evidence.
“Where is the actual proof of its surrender?” Sandra Gaudiosi asked. “She would not cancel a policy that she no longer had to pay premiums for. I just want an answer. I feel that’s something she never would have done.”
After reviewing the documents, we asked Prudential to take a look.
We remembered Prudential had gotten into big trouble in the late 1990s. The insurer settled a class action suit that claimed the company convinced consumers to buy policies that were more expensive than the ones they already had. The suit alleged salespeople “churned” policies, misleading some customers about what they were buying or how long they’d have to pay premiums. New policies were paid by stripping the value from the original policies, reports said.
This covered some 10.7 million consumers between 1982 — the year Gaudiosi surrendered her policy, according to Prudential — and 1995.
The company paid more than $1 billion as part of the settlement.
Prudential came back with more detail, and it was even more complicated than we expected.
A detailed letter said there was not one policy, but five, all sold to Gaudiosi during the time frame covered by the class action.
The first was the one we knew about, issued in 1960. Prudential said it was surrendered in September 1982 and a check for $1,300.61 was issued to Lilyan Gaudiosi.
Then there was a policy issued in October 1966, also with a $1,000 face amount. That was also surrendered in September 1982 and Gaudiosi was issued a check for $876.29, the company said.
Prudential said based on its review, the cash surrender value from those two policies was used as an initial contribution towards an IRA annuity contract for $2,000. The remaining $176.90 was returned to Gaudiosi, it said.
That annuity matured in September 1987, and Gaudiosi received a check for $2,858.43, Prudential said.
That’s when Gaudiosi purchased two more policies, Prudential said.
One was a $5,000 policy that would be paid up at age 90, but this lapsed just a year later for non-payment, it said.
The second, with a $10,000 benefit, issued in 1988, but this one lapsed for nonpayment in 1994.
At the time of Gaudiosi’s death, Prudential said, there were no valid policies.
This was more information than the family had ever received before, and it meant more questions than answers.
“I feel she got Bamboozled by an agent,” Sandra Gaudiosi said. “We never found any other policies in all her papers, and she kept good records.”
Gaudiosi said if her mother-in-law received a bill on Monday, she would pay it on Tuesday, so she doesn’t see why life insurance would go unpaid unless she wasn’t receiving statements.
“If she got a letter saying something was going to expire or be cancelled, she wouldn’t have let that go,” Gaudioso said.
We asked Prudential how Gaudiosi could determine if her mother-in-law’s policies were covered by the class action, and the company recommended Gaudiosi call the customer service line to ask.
Gaudiosi called, but the person who could help was out of the office so she left a message. She’s also filing a complaint with the Department of Banking and Insurance to make sure her mother-in-law wasn’t wrongly sold policies like so many others were back then.
“Maybe she misunderstood, or maybe she was approached by somebody who didn’t explain,” Gaudiosi said. “But Prudential didn’t even tell us about these policies until you got involved, so I don’t know what to think.”
Gaudiosi wanted to share her experience as a lesson for you, dear readers.
This is why you have to talk to your loved ones or a trusted advisor about your finances. If you have life insurance or retirement accounts, make sure someone knows where they are. You can ask the insurance or investment company to send duplicate statements and bills to a loved one or to your advisor so someone has your back.
It’s possible we’ll never know what Lilyan Gaudiosi’s intentions were with the policies. We just know she told her family she had insurance so she’d never be a burden to them.
Apparently, she was wrong.
“We don’t want other people to ever be in the same situation,” Sandra Gaudiosi said. “It’s so important to talk to your family.”