California's Attorney General and Insurance Commissioner wrapped up a long-running lawsuit in time for the Christmas holidays.
In announcing a $7.2 million settlement with multiple organizations, the California AG's office did what few do in such settlements. $5 million of the settlement will go to restitution with $1 million fines for two different companies.
The scam worked like this:
California officials said that the companies tricked senior citizens into buying annuities—long-term financial vehicles with high penalties for early withdrawal. The annuities offered the possibility of future payments, but only after a lengthy surrender penalty period. Because of their long window to mature, California officials said the investments were not typically suitable for senior citizens.
One of the companies, Family First Insurance, reportedly sent sales representatives, who were not authorized to practice law, to senior citizens’ homes to provide legal advice on estate planning. Those representatives naturally did not disclose that their ultimate goal was to sell annuities. After preparing the living trust documents the agents returned to the seniors’ homes—under the guise of acting as their financial or estate advisors—and induced the seniors to move their liquid assets into annuities.
Family First will be forced to cease operating according to California officials, who offered some solid advice for consumers in the wake of the problems.
* Consumers should be wary if someone claims to a trust expert, senior estate planner or paralegal, or to work with an attorney who is an expert in estate planning. These agents are not attorneys and not experts in living trusts. If seniors need assistance with preparing a trust or other estate plan, they should seek out their own attorney whose expertise is in estate planning.
* Be wary of free seminars or sales presentation on living trust services.
* Use caution if the representative asks for access to your personal financial information while setting up or updating an existing living trust. Agents use this ploy to ultimately pitch annuity investments.
* Some may also criticize existing investments, saying that these investments carry more risk than the annuity.
* And finally, a big warning bell should go off if someone does not discuss the drawbacks of a particular investment option.
Labels: California, consumer, financial, insurance, investment, scam
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