How to Spot Annuity Fraud, Elder Financial Abuse

How to Spot Annuity Fraud, Elder Financial Abuse

By Robert J. Boumis

Annuity fraud among senior citizens is a growing crime. In annuities fraud, a broker or agent sells a person an annuity, a form of long-term investment. However, the terms of an annuity can be set up in such a way that it is difficult, unlikely, or maybe even impossible to receive a payout from.

What is an Annuity?

Annuities are a type of contract between you and an insurance company. This contract sets up a either a single payout or a series of payments either immediately or in the future. 

Annuities offer several pros and cons, and may not be right for everyone. For some advantages, annuities may serve as a kind of life insurance, paying out to beneficiaries upon death. Additionally, annuities may have several tax advantages over other types of investments. However, some types of annuities depend on the stock market, and may suffer from volatility. Other downsides include fees for early cash-outs.

Fraudulent annuity plans go beyond the normal risks and penalties associated with annuities. For example, fraudulent annuities may charge exorbitant fees for cash out, or contain provisions that make it almost impossible to achieve a payout. For example, some require a 15-year wait before funds can be cashed out. When such an annuity is sold to a senior citizen, it can be very likely that they would die during this period, making it harder for their survivors to receive a payout. 

Elder Financial Abuse

Various government agencies, from the federal level down, publish various guidelines on how to spot a potentially-fraudulent or inappropriate annuity. According to the U.S. Securities and Exchange Commission or SEC, one of the first things you should do is check if the broker is legitimate. This agency has a database, called BrokerCheck, which maintains a list of all registered brokers. Never buy an annuity from someone who describes themselves as an “expert” or a “dealer,” in lieu of a registered broker. 

Additionally, the SEC advises that you ask for an annual prospectus. Under federal law, most annuities are technically a form of mutual fund. This requires them to maintain a prospectus.

Other state-level agencies also have advice on how to avoid annuity scams. For example, the Washington State Office of the Insurance Commissioner has their own set of red flags, some of which overlap with the federal-level recommendations. For example, the Washington Insurance Commissioner advises that you avoid high-pressure sales, as annuities are not a type of investment that should be purchased on a whim. They also advise avoiding free meals or other seminars, where sales are incorporated in “free lunch” settings. 

Take Legal Action

Lawsuits have been filed against companies and agents that sell and operated fraudulent annuities targeting senior citizens. These annuity fraud lawsuits seek to enforce various laws intended to protect the holders of annuities. Such annuity lawsuits may be able to enforce laws that provide more favorable terms, or at least get back the initial investment.  

If you’re suspicious of an annuity that was sold to you or to your elderly family member, you do have recourse. You can start by visiting the Life Insurance, Annuities Fraud Class Action Lawsuit Investigation. Here, you can enter information about your situation for a legal review by a trained expert with a background in annuity fraud litigation. The initial consultation is completely free of charge, and the guidance provided can help you figure out your options and the best steps to take in your exact situation. 

All class action and lawsuit news updates are listed in the Lawsuit News section of Top Class Actions