Consumer Advocates Pursue Legal Action Against Sellers of Annuities Sometimes Used To Help Qualify for Medi-Cal; Lockyer Files Suit
The California Advocates for Nursing Home Reform and the Institute on Aging are seeking class-action status for a lawsuit in San Francisco Superior Court that targets "living-trust mills," in which firms selling living trusts to retirees also persuade them to purchase "expensive" tax-deferred annuities, sometimes as part of an effort to transfer assets to qualify for Medi-Cal, the Sacramento Bee reports.
According to the Bee, firms target retirees by selling them living-trust packages while also promoting tax-deferred annuities. According to Insurance Commissioner John Garamendi (D), such packages are a legitimate estate-planning tool.
However, some critics say that annuities are inappropriate for many retirees because many retirees liquidate other assets at losses to purchase the annuities but do not live long enough to collect payments from the annuities. Meanwhile, the retirees do not have access to the money contained in the annuities, and large penalties apply if they withdraw funds beyond the specified payment.
According to Thomas Harris, supervisor of the Sacramento County Financial Abuse Investigation Team, the sales pitches for the annuities "often zero in on sources of worries for seniors, such as the high cost of long-term care." One pitch stresses that purchasing an annuity would allow the retiree to shift assets to qualify for Medi-Cal.
Garamendi said, "The living-trust mills are the genesis of many of the scams. We know it's a major problem." Garamendi said he would increase enforcement in the area and urged consumers to call his office for advice (Weaver Teichert, Sacramento Bee, 2/10).
Attorney General Bill Lockyer (D) on Thursday filed a lawsuit against firms and some agents of firms selling such living-trust packages, the Bee reports. The civil lawsuit seeks $70 million in restitution, $40 million in penalties and a court order permanently barring the firms' alleged "unlawful business practices" (Weaver Teichert, Sacramento Bee, 2/11).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.