Disclosure to the Rescue: A Conceptual Framework for Retained Asset Accounts

Abstract

RAAs (Retained Asset Accounts) are a life insurance innovation that is likely of small value to most beneficiaries. In many cases, it will make the most financial sense for a beneficiary to write a check to himself for the entire policy proceeds and deposit those funds into an insured bank account. Some beneficiaries, however, may find the RAA device helpful. It is impossible to anticipate the myriad circumstances that beneficiaries may face at the time of an insured's death. As long as insurers provide full and clear disclosure (which ERISA fiduciary standards demand), consumers should remain free to choose an RAA as one of several options.

Keywords: Retained Asset Accounts, RAAs, life insurance, ERISA, ERISA fiduciary liability

JEL Classification: K19, K39