Sun Life Assurance Company of Canada demutualized on March 22, 2000. This means that it went from being a mutual company in which each policy owner also owned a piece of the company to being a corporation owned by shareholders.
For lack of a better way to inconvenience its policy owners, Sun Life made them shareholders and sent them stock certificates. Doing so made tens of thousands of unsuspecting survivors of the Depression into corporate investors. For many of them, this will become a catastrophe that Sun Life could have avoided had at least one person in the company’s headquarters given the matter a little thought.
Many of Sun Life’s policy owners bought their insurance in the ‘40s or ‘50s. They are survivors of the Depression and World War II, who would never willingly invest in the stock market. Sending a stock certificate to them was like sending a Rabbit cork extractor to someone who had never pulled a cork out of a wine bottle–with no instruction sheet.
They received an important-looking piece of paper that they did not understand, just as the non-wine drinker would not know the Rabbit from a tire-pressure tester or a meat thermometer. He or she could probably figure from the sharp wire spiral that the Rabbit is not a sex toy, but beyond that would have no clue as to what it is. The Rabbit would be thrown in the junk drawer and eventually discarded. Similarly, the Sun Life stock certificate would be thrown in a desk drawer, soon to be lost forever. The policy owner would be totally unaware of how crucial and troublesome the loss of that pretty certificate would be.
If the problem were only the loss of the value of the stock, that would be a minor inconvenience. However, it is much worse than that. If the policy owner ever needs public benefits, such as Medicaid or housing assistance, the value of the stock can present a formidable obstacle. In the worst case, the policy owner might apply for public benefits without revealing ownership of the stock–after all he or she doesn’t even know what that certificate means–and be charged with fraud. Otherwise, the worker will ask about the stock that accompanies the life insurance and several months of benefits will be lost while the shareholder tries to get a new certificate. Similar problems will arise if the shareholder dies. Many probate estates will be opened for no reason other than to liquidate Sun Life stock.
If you or a family member lost a Sun Life stock certificate, you will find it is almost as hard to replace as your wife’s trust after an Eliot Spitzer incident. Here is a copy of the letter received by one hapless Sun Life policy owner:
The first obstacle in requesting a replacement certificate is that the Affidavit of Loss/Agreement of Indemnity must be filled out in triplicate and each of the three originals must be notarized. This is not too onerous–it only requires a trip to a national bank–but check out the requirements for an agent under a power of attorney to request a replacement certificate.
Many older citizens can no longer handle financial affairs and entrust their business to an agent under a power of attorney. According to the letter, Sun Life requires “the original or Notarial Copy of the Power of Attorney to be presented and must be certified within 6 months of presentation to us by an acceptable guarantor if the original was not issued in the last 6 months.” It goes on to say that certifications are not acceptable from a notary or commissioner for oaths and that there must be a certificate of continued validity attached. U.S. transfers require a Medallion Signature Guarantee on the power of attorney. Unless a very knowledgeable bank officer or stock broker is involved, these documentation requirements cannot be completed without the assistance of an attorney.
Finally, after all this, the stockholder must send a certified cheque, bank draft or money order for 2% of the value of the stock in Canadian funds! Try to find a financial instrument in foreign currency in most parts of the United States if you feel the need to be frustrated for a change. Fortunately for my Michigan clients, Canada is just across the Detroit River. What about people in Nebraska or New Mexico? Are they going to have make a trip to Canada to get a $300 money order?
It doesn’t have to be that difficult. In the first place, it is the stock certificate that is being replaced, not the value of the stock. They do not have to make a federal case out of replacing a stock certificate that is only for a few hundred shares. Secondly, there is no earthly reason why Sun Life could not accept U.S. funds. Finally, there was no reason to issue stock certificates, at all!
When Metropolitan Life Insurance Company demutualized in April 2000, MetLife’s new shareholders were not sent stock certificates. They were informed that their new shares would be held in an account for them. All they need to do to sell their shares is to make a phone call–Ba da Bing, Ring, Ring! They would then get a check–Ba da Boom, Ching, Ching! It is as easy as that.
If you are planning your estate or assisting someone else, take a careful look at the life insurance portfolio. Sun Life Assurance of Canada stock is particularly problematic, but many other mutual companies converted to corporations and issued stock, either on account or in certificate form, to their policy owners. Find those stock certificates now, rather than later. Lost certificates will need to be replaced at some point and the lapse of time will not make replacement any easier.
Once the shares have been found, transfer the shares to the brokerage account where the person’s stock portfolio his held, or liquidate them if they are the only stock holdings. There is little reason for someone who does not regularly invest in stocks to hold a few hundred shares of one insurance company. They just create problems when it comes time to liquidate or manage the estate.
John B. Payne, Attorney
Garrison LawHouse, PC
Dearborn, Michigan 313.563.4900
Pittsburgh, Pennsylvania 800.220.7200
law-business.com ©2008 John B. Payne, Attorney