Estate Planning

Beware of the Annuity Sharks

By Hull & Hull LLP

An article published in The Columbus Dispatch, an Ohio publication, shows us how vulnerable seniors can be to fraud through the purchase of financial products that are technically legal but not in their best interest.

An 83 year-old women had her life savings placed in an annuity but was subsequently solicited to cash in her existing policy and buy a new one. The 83 year-old suffered from partial blindness as a result of diabetes, dementia and she had recently moved into a nursing home. After being convinced to purchase a new annuity, the women died two weeks later. She received one monthly payment of $1,500 before she died. 

The beneficiaries of her estate received half of what they thought they should have from the new annuity and sought to recover from the investment company. The arbitration panel of the Financial Industry Regulatory Authority sided with the deceased's estate and awarded the beneficiaries of her estate compensatory damages.

The article states that this is not an uncommon practice. In January 2008, the Financial Industry Regulatory Authority fined the broker $225,000 for 'making unsuitable sales of deferred variable annuities to 23 customers'. 

Annuities can be great investments, but BUYER BEWARE. If there are questions about the age and health of the potential purchaser, it may not be in their best interest to purchase the annuity.

Thank you for reading,

Rick Bickhram

Full post as published by Toronto Estate Law Blog on June 10, 2009 (boomark / email).