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Elder Fraud: Law Blog Misrepresents Annuity as Security, Blows Opportunity To Do Good

by John Darer CLU ChFC MSSC RSP

The Law Blog at Legal Match.com blows an opportunity to properly address the important subject of protecting seniors and others from being placed into annuity products that are not appropriate for their circumstances.

"Actual Annuities are legitimate securities that can be very profitable long-term investment option for the right person.", according to the author of a post on the Law Blog at Legalmatch,com (see Elder Annuity Fraud: The Scam That Won't Go Away" Andrew Dat  August 5, 2010 Business Law section), Andrew Dat appears to be a staffer at legalmatch.com

Law Blog defines an "annuity scam" as one which "involves a financial advisor selling a long term insurance annuity to a client that doesn't need it".

One remedy that Law Blog/ Andrew Dat misstates as fact that "there are both federal and state laws that specifically prohibit this form of securities fraud".

After pairing the term annuity with derogatory and criminal acts twice,  Andrew Dat of Law Blog on Legalmatch.com admits "however, this is not to say that annuities themselves are scams". Unfortunately his apologies will not carry weight of with Google, Bing or Yahoo search engines.

A few other comments:

• Unless we are talking about variable annuities, annuities ARE NOT securities.
• Annuities are issued by insurance companies which are regulated by each state they are admitted to do business.
• In order to sell annuities you must possess a valid insurance license in the state of solicitation and writing and an appointment with the life insurance company that is the issuer of the annuity contract
• A federal layer comes into play where the solicitation and distribution variable annuities are concerned, as those who sell such products must possess a FINRA Series 6 or 7 and 63 in addition to an insurance license and appointment.

Many states have laws governing how seniors can be approached when it comes to annuities. Licensed agents in some states are required to take a specific course on the subject.

Regardless of whether you are dealing with seniors, parents of a brain damaged child, or a  disabled doctor, the financial professional should do an assessment of the person's needs before placing an individual into an annuity or any other financial instrument.

Those who appreciate the "subtleties" of the structured settlement watchdog's "unique" writing style might chuckle as he asks what do you expect from the author of an article about a serious topic that peppers his prose with:

"I apologize in advance for being a Derrick Downer (not "Debbie" as I'm a dude)"

"First of all slow down there Ke-mo-sah-bee"?

  Part of my "Muttley Crew"

 

 

 

 

What Does Certain and Life Annuity Mean? Annuity 101

by John Darer® CLU ChFC MSSC CeFT®  RSP CLTC

With baby boomers and retirees seeking stable guaranteed income these days and others appreciating it, it's more likely than not that they will at some point consider annuities.

Some annuity terms and phrases like "certain and life"can be confusing and I want to help ease your pain here.

This post is the beginning of a multi-part  Annuity 101 series that will be helpful to anyone considering annuities, whether you are a retiree or getting close to retirement; or you are a personal injury plaintiff or a claimant in a wrongful death action looking at a structured settlement annuity; or a seller of high value low basis property or seller of a business considering a structured installment sale; a plaintiff attorney or law firm who is contemplating structuring legal fees; or a celebrity who is looking to structure endorsement fees.

So what does "certain and life" mean? 

You may encounter annuity proposals which state "X$ per month certain and life" or "X$ per year for life with 30 years certain" or simply "X$ per month for 10 years certain". Simply put the certain period represents the number of years that will be paid whether or not the measuring life survives the entire payment schedule.

A certain period is sometimes mislabeled a guarantee period. While the terms would be synonymous if the annuity were to pay for a fixed period certain, the misnomer comes when the annuity includes a lifetime benefit.

The reason it's a misnomer is fundamental to what an annuity is. An annuity is an insurance contract guaranteed by the full faith and credit of the insurance company that issues it. With a lifetime benefit the benefits  ARE CONTRACTUALLY GUARANTEED.

Even an annuity that has no certain benefit such as a lifetime only annuity is contractually guaranteed.

This misnomer can lead to documentation errors. It is better to use the term "period certain" to describe payments that will be made "come rain or shine" whether living or not.

With all due respect to Ben Franklin, the continued parroting of an 18th Century saying " nothing can be said to be certain except death and taxes",  is inaccurate today because for people who qualify for some structured settlements the only thing certain is death and their annuity payments.

Look for more episodes of our Annuity 101 information series coming soon.

in the meantime, click the following link for more information and explanation of the types of structured settlement payments, or visit the glossary of structured settlement settlement terms,keywords and phrases for settlement planning and financial planning terms at 4structures.com